1099 Fines and Penalties

If you forgot to send out 1099s last year you can expect the IRS to apply a material penalty. This applies both to “forgotten” and incorrectly filed 1099 forms. The total penalty will be based in part on the date in which you correctly file the requisite returns:

  • If you file within 30 days of the due date, the penalty is $50 per 1099 up to a maximum of $536,000 per year.
  • If you file more than 30 days late but on or before August 1, the penalty goes up to $100 per 1099 up to a maximum of $1,609,000 per year.
  • If you file later than August 1, the penalty goes up to $260 per 1099, up to a maximum of $3,218,500 per year.

There are some exceptions to the prescriptive penalties:

  • You can show that there is reasonable cause, rather than negligence, for the failure to file correct forms by the due date;
  • You can demonstrate that the error or omission is inconsequential; and
  • Under certain circumstances, you show good faith in working to get corrected forms to the IRS.

However, if the IRS determines that you are showing intentional disregard for fulfilling your filing requirements, the penalty will increase to a minimum of $530 per 1099 with no maximum.

Best bet if you realize that you are late in filing or filed incorrect forms is to contact the IRS as soon as possible to explain the situation and then correctly file as required.