The Deadline to File Forms 1099 are Quickly Approaching

• January 9, 2023
• Carey M. Heyman, CPA

Here are some reminders and updates:

• Form 1099-NEC (Nonemployee Compensation): Reports total payments of $600 or more made to non-employee service providers who are organized as sole proprietor, limited liability company, limited partnership or estate.  This also includes professional fees paid to attorneys, even if the law firm is established as a corporation.  Aside from law firms, filing a Form 1099-NEC is not required if the receiving entity is established as a corporation.  Examples include independent contractors, consultants, accountants, landscapers, snow removal services and self-employed individuals.  The IRS recently released a continuous use format version of this form. This form is due to recipients and to the IRS by January 31, 2023.

• Form 1099-MISC (Miscellaneous Information): Reports total payments of $600 or more made in your ordinary course of business.  Examples include rent paid, prizes and awards, certain medical and healthcare payments, and royalties paid over $10. Beginning with the 2022 tax year, Box 13 should be checked to report the Foreign Account Tax Compliance Act (FATCA) filing requirement.  As a result, boxes 13 through 17 have been renumbered as 14 through 18. This form is due to recipients by January 31, 2023 (with some exceptions) and to the IRS by February 28, 2023.

• Other common versions of Forms 1099:
  • Form 1099-INT (Interest Income): Filed by interest-paying entities who paid at least $10 during the tax year. This form is due to recipients by January 31, 2023 and to the IRS by February 28, 2023.
  • Form 1099-DIV (Dividends and Distributions): Filed by banks and other financial institutions to report dividends and other distributions that amount to at least $10 during the tax year. This form is due to recipients by January 31, 2023 and to the IRS by February 28, 2023.
  • Form 1099-B (Proceeds From Broker and Barter Exchange Transactions): Filed by brokers to record gains and losses during the tax year that amount to at least $10. This form is due to recipients by February 15, 2023 and to the IRS by February 28, 2023.
  • Form 1099-R (Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, Etc.): Filed by companies who paid at least $10 in distributions from profit-sharing or retirement plans including IRAs, annuities, pensions, and insurance contracts. This form is due to recipients by January 31, 2023 and to the IRS by February 28, 2023.
  • Form 1099-S (Proceeds from Real Estate Transactions): Typically filed by lenders or real estate agents. This version records the proceeds from a real estate transaction.  The seller will also receive a copy of Form 1099-S in the event that they do not meet the IRS requirements for excluding the taxable gain from the sale from a taxpayer’s income tax return. This form is due to recipients by February 15, 2023 and to the IRS by February 28, 2023.

Shockingly, the most common mistake observed on Forms 1099 are to the taxpayer or employer identification numbers. It is highly recommended that W-9s are checked, re-checked and checked one last time to ensure accuracy.

Extensions and Penalties

Failure to file the correct information or furnish the correct payee statements by the due dates may expose a business to the following penalties:

• Small businesses:
  • Defined by an average annual gross receipts of $5 million or less over the most recent three taxable years.
  • $50 to $290 per recipient, with a maximum penalty of $1,177,500 per year.

• Large businesses:
  • Defined by an average annual gross receipts in excess of $5 million over the most recent three taxable years.
  • $50 to $290 per recipient, with up to a maximum of $3,532,500 per year.

Failure to provide correct information or payee statement due to intentional disregard increases the penalty to at least $580 per Form 1099 or statement, with no maximum penalty.

Thanks to Consulting Chief Financial Officer (and real estate industry colleague) Jim Milliken for authoring this post! CLA’s Outsourced Accounting practice manages Form 1099 filings for thousands of clients every year. And as luck would have it, CLA is presenting a complimentary webinar on Thursday, January 19th titled “Prepare For and Streamline the Year-End Close Process” that will address Forms 1099 and other year-end financial matters. Be sure to tune in!

Tags: 1099, 1099-B, 1099-DIV, 1099-INT, 1099-MISC, 1099-NEC, 1099-R, 1099-S, Private Equity, Real Estate, Federal and state taxation, including proposed regulations, Year-end tax planning | Comments Off on The Deadline to File Forms 1099 are Quickly Approaching