1099 E-File Penalty

1099 E-File Penalties

Both the IRS and state departments of revenue impose harsh penalties on business filers who fail to file 1099 forms in a timely fashion or who are required to file electronically and file on paper instead. This section of our website sheds light on the different types of information return penalties.

Penalty for Failure to File 1099 Forms Electronically When Required to Do So

Business filers required to file 1099 forms electronically but fail to do so, and do not have an approved waiver (Form 8508), may be subject to a penalty of up to $100 per return for failure to file electronically unless they can establish reasonable cause. The penalty applies separately to original returns and corrected returns.

Important example: A business filer is required to file 270 1099 forms electronically, but instead of e-filing sends the 1099 forms to the IRS on paper by the paper filing due date (end of February) . What is the penalty in this case? The penalty in this case is applied only to 20 forms 1099. The first 250 returns filed on paper are not subject to the penalty for failure to file electronically. So the penalty will be $100 X 20 = $ 2,000.

Note: You can file IRS Form 8508 in order to request a waiver from filing 1099 forms electronically.

Penalty for Failure to Send 1099 Forms to Recipients by the Due Date

There is a $100 penalty per form imposed on business filers for failure to send forms 1099 MISC, 1099 INT, 1099-DIV and other 1099 returns to recipients by January 31 of each year. The penalty is reduced to $30, if the payer sends the form within 30 days of the deadline.

Penalty for Failure to File Correct 1099 Returns with the IRS by the Due Date

If you are a business filer required to file 1099's and you fail to send accurate 1099 forms to the IRS by the due date (typically end of February for paper filers) and you cannot show reasonable cause, you may be subject to a $100 penalty per form. The penalty applies if you fail to file on time, you fail to include all required information, or you include incorrect information on the 1099 form(s). The penalty is reduced to $60 per form if you correctly file more than 30 days after the due date, but by August 1st. The penalty is further reduced to $30 per form if you correctly file within 30 days of the due date. The penalty does not apply to any failure that you can show was due to reasonable cause and not to willful neglect.

Note: You can file IRS Form 8809 to request an extension of time to file 1099 forms.

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