Have you filed your 1099-MISC forms yet?
In the past, small businesses were not too hard-pressed to provide their employees and contractors with the appropriate tax forms in a timely manner. This is no longer the case. Increased penalties and accelerated deadlines for 2017 should be cause for concern for businesses that have relied on the lax attitude that the IRS formerly had toward the correct and punctual filing of these documents. As the deadline to issue small business employee tax forms fast approaches, here’s what Coral Gables small business owners need to know about the changes that the IRS has made to the tax filing process for 2016 returns.
What Changes Have Been Made?
In 2015, the Trade Preferences Extension Act effectively more than doubled penalties related to filing returns such as forms 1099 and W-2. Formerly, the penalties amounted to $100 per form that businesses incorrectly filed or failed to file. The penalty for such mistakes now amounts to $250 per form. Businesses that intentionally disregard their obligation to file have also seen an increase in penalties from $250 to $500 per form. Though these changes were already in effect last year, small businesses need to be especially aware because of this year’s accelerated due date.
Thanks to the Consolidated Appropriations Act of 2016, businesses are seeing changes in the deadline to file certain forms. The IRS already required businesses to provide form W-2 to their employees by January 31st, but now that deadline also applies to W-2 forms submitted to the IRS and SSA, earlier than their former due date by about a month. Form 1099-MISC also needs to be filed by January 31st if your business is reporting any amount in Box 7 (the majority of businesses filing form 1099-MISC record amounts in this box). The time for businesses to take action to avoid these penalties is now.
How to Avoid Penalties
With January coming to a close, there is no time to waste in getting the information you need to file these forms correctly and on time. The first step you need to take to avoid the increased filing penalties is to ensure that you have a completed form W-9 from each of your employees and contractors. This form will give you the name, address, and Social Security number of each of your employees, information that you need in order to prepare your tax forms for filing. Ensure that the information on each W-9 is correct by using the IRS’ Taxpayer Identification Number Matching Program, and correct any mistakes that you find.
The recent changes to the tax filing process are not without exception. For instance, the IRS may not penalize smaller businesses as harshly for failing to file or incorrectly filing forms 1099-MISC and W-2. It is just this sort of nuance that requires expertise. As with any tax procedure, you should consult with a professional throughout the process to ensure that you are doing everything that you can to protect your business. Contact the tax professionals at CALAS Group Accounting and Financial Services today to help your Coral Gables small business avoid these penalties.