2015 Filing Requirements for Certain IRS Information Returns: Penalties Increased

On June 29, 2015, President Obama signed into law the Trade Preferences Extension Act of 2015 (the Trade Act). The Trade Act significantly increases penalties for failing to file correct information returns or provide correct payee statements.

Increased penalties apply not only to Forms 1094-C and 1095-C, which applicable large employers (ALEs) will use to report health insurance coverage offered to full-time employees, but also to Forms W-2, 1098, and the 1099 series (i.e., Forms 1099-R and 1099-MISC).

Filing requirements for Forms 1099 and 1096 are summarized below. These 2015 filings are due to the IRS no later than February 29, 2016. Forms 1099 are due to the recipients no later than February 1, 2016. The most commonly required forms are:

1099-MISC - Each unincorporated party to whom you have paid $10 or more in royalties, or $600 or more in gross rents, prizes and awards, or nonemployee compensation (such as fees, commissions, etc.). A copy of each 1099-MISC prepared for nonemployee compensation for PA-based work needs to be sent to the Pennsylvania Department of Revenue.

1099-INT - Each party to whom you have paid $600 or more of interest income in the ordinary course of business. Only certain financial institutions are required to file if interest paid is $10 or more.

The penalties for failure to file the required forms (without reasonable cause) are as follows:

  • $250 (increased from $100) per information return for each failure to timely file. Lower penalties apply if the taxpayer promptly corrects the failure.
  • $250 (increased from $100) for each failure to timely furnish a correct statement to the payee.
  • If the above failures are due to an intentional disregard of the requirements for filing, the penalty is $500 (increased from $250) per payee statement.

Keep in mind the IRS mandates that you indicate on your business income tax return whether you are required to file 1099s and if you did, in fact, file them.