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Penalties for issuing 1099 to I-contractors after 1/31

What are penalties not issuing 1099 to independent contractors before 1/31.  Let's say I issued 1099 to independent contractors in Feb and filed 1099 and 1065 to IRS electronically before 3/31.  How can IRS find out I did not send 1099 to independent contractors before 1/31?  if they find out, what are penalties?
    Section O. of the general instructions for information returns at

    http://www.irs.gov/instructions/i1099gi/ar02.html#d0e1753

    deals with penalties for failure to file.  I've extracted a portion of this section below, but you should go over there and read it all:

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    Failure To File Correct Information Returns by the Due Date (Section 6721)

    If you fail to file a correct information return by the due date and you cannot show reasonable cause, you may be subject to a penalty. The penalty applies if you fail to file timely, you fail to include all information required to be shown on a return, or you include incorrect information on a return. The penalty also applies if you file on paper when you were required to file electronically, you report an incorrect TIN or fail to report a TIN, or you fail to file paper forms that are machine readable.

    The amount of the penalty is based on when you file the correct information return. The penalty is:

        *      $30 per information return if you correctly file within 30 days (by March 30 if the due date is February 28); maximum penalty $250,000 per year ($75,000 for small businesses, defined below).
        *      $60 per information return if you correctly file more than 30 days after the due date but by August 1; maximum penalty $500,000 per year ($200,000 for small businesses).
        *      $100 per information return if you file after August 1 or you do not file required information returns; maximum penalty $1,500,000 per year ($500,000 for small businesses).

    If you do not file corrections and you do not meet any of the exceptions to the penalty described on this page, the penalty is $100 per information return.
    Small businesses—lower maximum penalties.   You are a small business if your average annual gross receipts for the 3 most recent tax years (or for the period you were in existence, if shorter) ending before the calendar year in which the information returns were due are $5 million or less.

    Exceptions to the penalty.   The following are exceptions to the failure to file penalty.

       1.      The penalty will not apply to any failure that you can show was due to reasonable cause and not to willful neglect. In general, you must be able to show that your failure was due to an event beyond your control or due to significant mitigating factors. You must also be able to show that you acted in a responsible manner and took steps to avoid the failure.
       2.      An inconsequential error or omission is not considered a failure to include correct information. An inconsequential error or omission does not prevent or hinder the IRS from processing the return, from correlating the information required to be shown on the return with the information shown on the payee's tax return, or from otherwise putting the return to its intended use. Errors and omissions that are never inconsequential are those related to (a) a TIN, (b) a payee's surname, and (c) any money amount.
       3.      De minimis rule for corrections. Even though you cannot show reasonable cause, the penalty for failure to file correct information returns will not apply to a certain number of returns if you:
             1.  Filed those information returns,
             2.  Either failed to include all the information required on a return or included incorrect information, and
             3.  Filed corrections by August 1.

    If you meet all the conditions in a, b, and c above, the penalty for filing incorrect returns (but not for filing late) will not apply to the greater of 10 information returns or ½ of 1% of the total number of information returns you are required to file for the calendar year.

    Intentional disregard of filing requirements.   If any failure to file a correct information return is due to intentional disregard of the filing or correct information requirements, the penalty is at least $250 per information return with no maximum penalty.
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    As a practical matter I would think it would be very difficult for the IRS to determine that 1099's were mailed out after the due date.  It seems like the only way they would become aware of this issue would be if a bunch of independent contractors were contacting the IRS and complaining about late 1099's.

    Tom Young
    • How can IRS find out that you issued 1099 to independent contractors after 1/31?  As long as you file 1099 to IRS before 3/31, it seems that it is a problem between employers and independent contractors and IRS does not want to be in between them.
    • As I said above, I think it would be difficult for the IRS to spot this issue.

      Tom Young