1099 Forms Are Not Optional – They’re Required By Law

We wanted to provide this reminder to ensure that you meet your obligation for all 2020 payments to unincorporated individuals and businesses of $600 or more (rents, services, prizes, attorney fees, etc.). The IRS is increasingly focusing their attention in this area since it is the agency’s main weapon against under reporting of income. Penalties for failing to file correct information returns have more than doubled in the last few years alone while employers, simple schedule Cs and even single property landlords, are facing intense new scrutiny of their 1099s to prevent under-reporting by independent contractors. Failure to file the form for 2020 or providing wrong information could cause a penalty that could be as much as $820 per each 1099 omitted.

New for 2020 the IRS has reintroduced Form 1099-NEC, Nonemployee Compensation, as the new way to report self-employment income instead of Form 1099-MISC as traditionally had been used. While many states do not require 1099 submission since they get such from the IRS, the 1099-NEC is not so included.

The filing deadline for 2020 W-2s and most 1099 forms is February 1, 2021. To cut down tax fraud, many states have moved up the filing deadline.

You really should try to get your bookkeeping done by January 15, 2021 to allow enough time to complete and have the 1099s reviewed so you can meet the required February 1, 2021 filing deadline for distribution to those individuals (and then to the taxing authorities).