1099 forms are used for sources of income such as independent contractors income unearned income and HSA distributions. Please see below the changes to 1099s effective this year and the penalties associated with them.
Changes in 1099 reporting for 2012
The requirement described in the 2011 instructions for persons receiving rental income from real estate to report payments for certain rental property expenses on Form 1099-MISC was repealed by Congress. You do not have to report those payments on Form 1099-MISC.
When to file:
If you pay more than $600 in non-employee compensation prizes or rent to any non-corporate entity during the calendar year you are required to send that person or business a 1099-MISC form by Jan. 31 of the following year.
Report on Form 1099-MISC only when payments are made in the course of your trade or business. Personal payments are not reportable. Any amount of fishing boat proceeds paid requires issuance of a 1099-MISC form as does the sale of more than $5000 in consumer goods provided by you to another business person (commission paid to a non-employee). In addition to the copy you provide to the person you paid you must file another copy with the IRS. The IRS copies of all 1099-MISC forms must be sent by Feb. 28 with a 1096 transmittal form.
Penalties for not filing or late filing increase with time ranging from $15 to $50 per form not filed or incorrectly filed. So for simply not filing them at all the penalty is $50 per form. If you file an incorrect 1099 form but correct it by Aug. 1 the IRS will usually forgive the penalty. On the other hand if the IRS can show “intentional disregard” of the filing requirements or the accuracy of the information the minimum penalty is $100 per 1099 form. Your best bet is to file on time and make sure you have the recipient’s correct name address and ID number. If you are audited by the IRS and it discovers just 10 instances where you should have filed 1099s but intentionally did not the penalties could be in the thousands of dollars.
As you prepare for tax season Contact Lindemeyer CPA with questions about these changes or with your general tax questions.