Use 1099-MISC Filing Issues to help grow your tax accounting practice

With the advent of higher penalty rates for failure to file the required information returns (e.g., 1099s) it may be appropriate for tax professionals to become pro-active in prompting their business clients to file 1099-MISC information returns.

The penalties have been doubled for informational returns filed in 2016 and subsequent years, and are $250 for each informational return, up to a maximum of $3,000,000. IRC 6721(f) provides for inflation-adjustments for returns filed after 2014 – IRS Rev Proc 2016-11 includes the inflation-adjusted numbers for 2015 for returns required to be filed after 12/31/15.

If the payer’s gross receipts for the year don’t exceed $5 million and the returns are filed late but not later than August 1, 2016 the penalty is reduced as follows:

  • $50 if correct, and filed not later than March 30, 2016 (the 30th day after the required filing date), or
  • $100 for returns filed after March 30th but no later than August 1, 2016.

Filing requirements – It is good practice to remind your business clients that they are required to file informational returns (1099-MISC) for any individual (other than an employee) to whom they paid an aggregate of $600 or more during the year for services in the course of their business.

2016 due dates – The normal due date for supplying a copy of the 1099-MISC to recipients is January 31.  However January 31, 2016 falls on a Saturday, so the due date moves to the next business day, February 1, 2016. The IRS filing deadline for the forms is normally the last day of February. Since 2016 is a leap year, the due date is February 29, 2016.

For those that wish to become proactive with your clients’1099-MISC filing requirements, ClientWhys has developed a suggested letter (illustrated below) that you can send to them as a reminder and include the 1099-MISC Worksheet, developed by ClientWhys, that you can include with the letter so the client can provide you with the information needed to prepare the 1099-MISCs. This letter can be used in a conventional mailing or via e-mail.  Note: The worksheet is form-fill, and the only way to utilize form-fill is to e-mail the form to clients.

Dear [Client Name]

This is to remind you that you are required to file information returns (1099-MISC) for any individual, other than an employee, to whom you paid an aggregate of $600 or more during the year for services in the course of your business.

If you are liable for filing 1099-MISC forms for the 2015 year, you are required to provide a copy to the recipients by February 1, 2016 and also file copies along with a transmittal form to the IRS no later than February 29, 2016 to avoid penalties.

The penalties for failure to file the required informational returns have been doubled this year, and are $260 per information return. The penalty is reduced to $50 if a correct, but late, information return is filed not later than the 30th day after the required filing date, or to $100 for returns filed after the 30th day but no later than August 1, 2016. If you are required to file 250 or more information returns, you must file electronically.

If you would like this firm to assist you in the preparation of the 1099-MISC forms that your firm is required to file for 2015, please complete the attached worksheet and return it to this office.

Best Regards,

[Firm]

Download the Client 1099 PDF Worksheet.

  • Lee Reams II

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