2016 Filing Year-End 1099’s (Updated)

December 26, 2016 by Ed Becker

December Tips for Small Businesses

All businesses are required to give a Form 1099 to any non-employee service provider that the business paid for services provided during the calendar year. The deadline to issue 1099’s is January 31, so now is the time to make sure you have all W-9’s completed with current addresses and tax payer identification numbers.

The W-9 tax form is an important tax form for any employer with freelance workers. The full official name for this form is Form W-9: Request for Taxpayer Identification Number and Certification.  This form is used for employers to collect the most important information from freelance workers. These workers or affiliates get paid by the employer, but the worker is responsible for their own taxes. The W9 form gets reported to the IRS to help them match income that independent contractors earn.

The most common 1099 received is a 1099-MISC. Any individual earning non-employee compensation of more than $600 during the year will receive a 1099-MISC. The usual recipients are contractors and self-employed individuals. It could also include seasonal workers that you do not put on payroll because they will not work long-term. These would be considered independent contractors.

The IRS determines non-employee compensation based on the following factors: If the following four conditions are met, you must generally report a payment as non-employee compensation.

• You made the payment to someone who is not your employee;
• You made the payment for services during your trade or business (including government agencies and nonprofit organizations);
• You made the payment to an individual, partnership, estate, or, in some cases, a corporation; and
• You made payments to the payee of at least $600 during the year.

For annual amounts below $600, you as the employer are not required to issue a 1099 Form.

Deadline for Issuance

Companies are required to submit 1099s to payees by January 31 for most types of Forms 1099. Due dates vary, however, based on the type of Form 1099. Due dates for the 2016 tax year have changed. Now all parts of the 1099-MISC are due January 31st. Other types of 1099 forms may have other due dates. For information on all changes to Employment Tax Due Dates.

Penalties for Failure to Properly File

Furnishing and filing 1099’s is an important function, and the IRS demonstrates this by penalizing the party responsible for filing the information returns for a variety of failures. Penalties will be assessed for failure to timely file correct information returns, failure to furnish correct payee statements and for filing fraudulent returns. The amount of the penalty imposed on the responsible party is determined by the number of incorrect or late filings and increase based on the amount of delay. Filing fraudulent information returns significantly increases the penalties.

There are many rules and regulations as to issuance of 1099’s and it is recommended that you speak with your CPA and or outsourced bookkeeping service to determine your obligations as an employer.

For more information please see use this IRS link: IRS 1099-Misc Instruction