In recent years there have been some significant changes to the rules regarding issuing a 1099-MISC Form. It used to be easy. If you paid someone $600.00 or more you needed to send them a 1099-MISC (Ok, so that is a bit of generalized statement) by January 31st, and the IRS copies by February 28th.
Not so simple any more. Here are the big changes that you should be aware of as we head into this next filing season.
- NEW DEADLINES: You still need to send your vendors their copies by January 31st but now you also need to send the IRS their copy by January 31st for those 1099-MISC forms with amounts reported in Box 7: NonEmployee Compensation. If the 1099-MISC has Box 7 empty, the original February 28th date applies. Recommendation: Plan to remit all 1099-MISC forms to all parties by January 31st to avoid any missed deadlines.
- PAYMENTS MADE BY CREDIT CARD OR PAYPAL: This is most likely the toughest of the changes to integrate easily into your 1099-MISC process. Any payments made to a vendor by credit card or PayPal do NOT need to be included in the totals on the 1099-MISC form as they will be reported by the credit card company or PayPal on a 1099-K to your vendor (see the Instructions for Form 1099-MISC at www.irs.gov for more information). ** As business owners who not only send 1099-MISC forms but also receive them, you will receive a 1099-K if you took payments from debit or credit cards, and/or from companies such as PayPal over $20,000 in gross payments and more than 200 transactions. **
- NEW PENALTIES: As a measure in the Trade Preferences Extension Act of 2015 the penalties for failing to issue a 1099-MISC have increased from $250.00 per form to $500.00 per form. This penalty applies to BOTH the copy to your vendor and the copy to the IRS. Meaning failing to file your 1099-MISC forms could cost you $1000.00 per vendor!! The penalty for an incorrect form has also increased from $100.00 to $250.00. Plus, missing those new deadlines we talked about can cost between $50 and $100.00 depending on how late you are.
Processing and sending 1099-MISC forms to your vendors doesn’t have to be a difficult undertaking, as long as you know the rules and prepare ahead of time. Stay on top of your bookkeeping, make sure you have W-9 information for any and all vendors you may possibly need to “1099” and plan time in your January schedule to get them done.
Want to know more about the process and whether or not you’re compliant in your process? Not certain if you are ready for these changes? Would you like more information on this topic, or on how to empower yourself and your business? Please contact us today at www.fournierabservices.com!