Late 1099 Penalty: Avoid IRS Fines in 2025

The late 1099 penalty is a fine imposed by the IRS for failing to file 1099 forms on time. Businesses must submit these forms to report non-employee compensation. Deadlines are typically January 31st for 1099-NEC and February 28th for 1099-MISC if filing by paper. Penalties range from $50 to $280 per form, depending on how late the filing is, with a maximum annual penalty of $1,130,500 for large businesses.

To avoid these fines, ensure timely filing, utilize tax software for reminders, and consider electronic submissions for efficiency. Staying compliant not only avoids penalties but also maintains good standing with the IRS, safeguarding your business's financial health.

The 1099 tax form is not a tax form in the traditional sense because it is not technically required by an individual to file their taxes. It is often referred to as an “Information Return”. Every business is required to file a 1099 to the Internal Revenue Service and provide a copy of the 1099 to the taxpayer so it can be used for income tax preparation.

While it is most often associated with businesses utilizing independent contractors there are numerous situations which may result in a 1099 being required. It is critical to provide appropriate 1099 forms to taxpayers and file them with the IRS in a timely manner. Failure to file in a timely manner can lead to significant penalties.

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1099 failure to file penalty: what are the filing deadlines?

While there are a lot of different types of 1099 forms, they are all considered "payee statements". Business owners need to be aware of two different 1099 form filing deadlines. As with all IRS deadlines, the date will be moved to the next business day if the due date falls on a weekend or holiday.

Deadline for Providing 1099s to Recipients

The first deadline is when the 1099 must be provided to recipients. The due date depends on the type of 1099. The 1099-MISC (with data in boxes 8 or 10), 1099-B, and 1099-S must be provided to recipients by February 16th. All other 1099 forms must be provided by February 1st, including any 1099-MISC which does not have data in boxes 8 or 10.

Deadline for Filing A Form 1099 with the IRS

The second due date for form 1099 is when it must be provided to the Internal Revenue Service. This due date varies depending on whether you file with the IRS by mail or electronically. If you file paper forms by mail, the 1099-NEC must be filed by January 31st and all other 1099 forms must be filed by February 28th. If you are filing electronically, the 1099-NEC due date remains January 31st, but all other 1099 forms are due on February 28th.

Even if you do not receive an information return, you could still file taxes without a 1099.

Why Are the Due Dates so Early?

The due dates for information returns are earlier than most tax return paperwork because it allows the IRS to detect refund fraud more easily. The IRS recommends you e-file because it is not only the quickest option but also the most accurate.

What Are the State Filing Requirements?

Most new business owners assume that filing their form 1099 with the Internal Revenue Service will also cover any state specific requirements. While this may be true in many cases it is not universal.

There is a combined state/federal program for 1099-Series forms which many states take advantage of. This program allows you to file with the IRS and the information is then transmitted to the state. Currently, only 31 states fall into this category so it is always important to check your state requirements.

There are also 12 states which do not require the filing of a Form 1099-MISC and 6 states that require a separate filing.

1099 failure to file penalty: what are the late filing penalties?

There are two different types of 1099 late filing penalties based on when the 1099 is filed, if it is filed at all. These penalties assume the correct payee statement was filed and no corrections are needed.

1099 Late Filing Penalties If You File

A 1099 late filing penalty is a bit different than how a tax underpayment is calculated. The amount of the penalty is based on how late the filing is and how many 1099's are filed late and the size of your business. A "small business" is any business with gross receipts of $5 million or less. A large business is any business with more than $5 million in gross receipts during the tax year.

Keep in mind the penalties listed below are based on 2020 IRS regulations, so the amounts may have increased or decreased for the 2024 tax year.

Less Than 30 Days Late

For filing Form 1099 less than 30 days late, the penalty is $60 per form, with a maximum penalty of $228,500 for small businesses and $781,500 for large businesses. File within 30 days to avoid larger penalties.

31+ Days Late But Prior to August 1st

If you file Form 1099 more than 30 days after the deadline but by August 1, the penalty is $130 per form, with a maximum penalty of $781,500 for small businesses and $2,344,500 for large businesses.

After August 1st

If you file after August 1 or do not file at all, the penalty is $610 per form, with a maximum penalty of $2,113,000 for small businesses and $6,339,000 for large businesses.

What happens for a 1099 failure to file penalty?

If you do not file your required 1099s at all then the IRS may impose additional penalties than the $270 per statement. This situation will arise when the IRS determines the lack of filing is due to "intentional disregard". The Internal Revenue Service notes that intentional disregard can occur when you know or should know the filing requirements but intentionally ignored them.

The IRS must prove three criteria to establish intentional disregard for filing requirements.

1. You were required to file a form 1099
2. You know or should have known a 1099 had to be filed
3. You ignored the duty to file the 1099 both correctly and timely
   

If the IRS believes all three criteria have been met, the penalty for not filing a 1099 is $550 per return and there is no cap on the total penalty amount.

1099 Penalties if You Do Not Provide a Timely Payee Statement

Along with filing the 1099 with the IRS, you must also provide the 1099 to the payee. The penalty for not providing a correct information return to the payee is the same as if it was not filed timely with the IRS. If it is determined you only provided partial information the penalty is $530 with no cap on the total penalty amount. Fortunately, there are no penalties for inconsequential errors.

Consequences of not filing 1099 forms

Understanding the 1099 failure to file penalty

The 1099 failure to file penalty is a financial consequence imposed by the IRS when businesses or freelancers submit required 1099 forms late. For the 2024 tax year, penalties range from $60 to $610 per form, depending on how late the filing is. Filing within 30 days after the deadline results in a $60 penalty per form. Between 30 days and August 1, the penalty increases to $130 per form. Filing after August 1 or not filing at all results in a $610 penalty per form.

These penalties can add up quickly, especially for small businesses filing multiple 1099s. For example, missing 10 forms filed after August 1 could result in a $6,100 penalty. The IRS also sets maximum penalty limits based on business size, but penalties can still be a significant financial burden. Understanding these amounts helps prioritize timely filing and avoid unnecessary costs.

To avoid penalties, use accounting software like QuickBooks or specialized tools such as Tax1099 to track and file 1099 forms electronically. Set calendar reminders for January 31, the typical deadline, to ensure timely submission. These steps can save you hundreds or thousands in penalties and keep your business compliant.

Additional repercussions beyond financial penalties

Failing to file 1099 forms can lead to more than just monetary fines. The IRS may initiate audits or investigations if they detect missing or incorrect filings. These audits can disrupt your business operations and require extensive documentation, costing you time and resources. For freelancers and small businesses, this can be particularly stressful and costly.

Not filing 1099s can damage your professional reputation. Vendors or contractors who do not receive their 1099 forms on time may lose trust in your business, affecting future collaborations. Additionally, states like California and New York have their own reporting requirements and penalties, so you could face state-level consequences.

To mitigate these risks, maintain organized records of all payments made to contractors throughout the year. Using platforms like HelloBonsai or Gusto can automate 1099 generation and delivery, reducing errors and ensuring timely compliance. Staying proactive protects your business from audits and preserves your professional relationships.

How to respond if you miss the 1099 filing deadline

If you realize you missed the 1099 filing deadline, act quickly to minimize penalties. The IRS allows late filings with reduced penalties if you file as soon as possible. For example, filing within 30 days after the due date reduces the penalty to $60 per form instead of $610. The sooner you file, the lower your penalty will be.

Start by gathering all necessary information about payments made to contractors or vendors. Use IRS Form 1099-NEC for nonemployee compensation and submit both the IRS copy and the recipient's copy promptly. You can file electronically using the IRS FIRE system or through approved e-filing services like Tax1099 or Track1099, which simplify the process and provide confirmation of receipt.

Send a written explanation to the IRS if your late filing was due to reasonable cause, such as a natural disaster or serious illness. This may help reduce or waive penalties. Implement a system to prevent future late filings, such as:

• Automated reminders
• Hiring a tax professional to oversee compliance

Penalties for filing 1099 forms late by business size

1099 penalties for small businesses

Small businesses face specific penalties for filing 1099 forms late, which depend on how late the forms are submitted. For the 2024 tax year, the IRS charges $60 per form if you file within 30 days after the deadline. If you file more than 30 days late but before August 1, the penalty increases to $120 per form. After August 1 or if you don’t file at all, the penalty rises to $310 per form.

For example, a small business with 10 late 1099 forms could owe $600 if filed within 30 days or up to $3,100 if not filed by August 1. The IRS caps penalties for small businesses at $225,000 per year. Using platforms like QuickBooks or TaxBandits helps automate 1099 filing and avoid these costly penalties.

To avoid penalties, small businesses should set calendar reminders for the January 31 deadline and consider e-filing early. If you will miss the deadline, filing as soon as possible reduces penalties. Keep accurate contractor records throughout the year to streamline the process. These steps help protect your business from unnecessary fees.

1099 penalties for large businesses

Large businesses face higher penalties for late 1099 filings compared to small businesses. In 2024, the penalty per late form is $120 if filed within 30 days after the deadline, $240 if filed after 30 days but before August 1, and $530 if filed after August 1 or not at all. These amounts reflect the IRS's increased scrutiny on larger entities.

For instance, a large company with 100 late 1099 forms could incur penalties starting at $12,000 if filed within 30 days late, escalating to $53,000 if filed after August 1. The annual maximum penalty for large businesses can reach $1,130,500, making timely filing critical. Many large businesses use software like Track1099 or the IRS FIRE system to manage bulk filings efficiently.

Large businesses should implement internal controls to track contractor payments and 1099 deadlines. Early preparation and using electronic filing systems reduce the risk of penalties. If delays occur, filing promptly lessens fees. Regular training for accounting staff on 1099 requirements can prevent costly mistakes.

How to minimize penalties regardless of business size

The best way to minimize 1099 failure to file penalties is to file as early as possible. The IRS calculates penalties based on when you file, so even a late filing reduces fees compared to no filing. Using e-filing services like HelloBonsai or TaxBandits ensures faster submission and confirmation.

Maintain accurate records throughout the year by collecting W-9 forms from contractors upfront and tracking payments carefully. This preparation simplifies year-end reporting and reduces errors that can delay filing. If you discover an error after filing, submit corrected 1099 forms promptly to avoid increased penalties.

If financial hardship prevents timely filing, you can request a penalty abatement from the IRS by demonstrating reasonable cause. This process requires documentation, such as illness or natural disasters. Understanding these options helps businesses manage risks and avoid unnecessary costs related to late 1099 filings.

What If You File a 1099 With Incorrect Information?

There are two different classifications of 1099 errors - Type 1 and Type 2. The correction method will be determined by what type of error it is.

What is a Type 1 Error and How Do You Provide A Correct Form?

A Type 1 error occurs when the following information is incorrect:

• Incorrect amounts
• Incorrect codes
• Incorrect checkboxes are marked
• Incorrect payee name
• Incorrect payee address
• When a form is filed but should not have been

Correcting a Type 1 error requires completing a 1099 with the correct information and checking the "CORRECTED" checkbox. Send the corrected form to the recipient. A red Copy A must be sent to the IRS with Form 1096 if filing by paper. If e-filing, you do not need to send Form 1096 or include the originally filed forms. Only submit the new 1099.

What is a Type 2 Error and How Do You Correct It?

A Type 2 error occurs when the following information is incorrect:

• Incorrect payer information (including incorrect TINs)
• Incorrect payee information (including incorrect TINs)
• The wrong form was prepared (1099-DIV instead of a 1099-INT)

Correcting a Type 2 error requires filing two Form 1099s. The first includes the same payer and recipient information as the incorrect form. All amounts will be $0.00 and the "CORRECTED" box should be checked. Filing this form zeros out the incorrect information from the previously filed form.

Once this has been completed, you will need to file a new Form 1099 with the correct information. The filing process is the same as the Type 1 error. The corrected form will be sent to the recipient, and a red Copy A must be sent to the IRS. If you are e-filing, Form 1096 is not needed. However, if you are filing by mail, it is required.

When to Void a 1099

Voiding a 1099 is an option in some cases. Next to the "CORRECTED" checkbox there is a "VOID" checkbox. If you have mistakes on a completed 1099 and have not submitted it to the IRS, you can void it. You cannot void a 1099 if you have already filed it with the IRS.

Why Void a 1099

The primary benefit of voiding a 1099 is administrative. If you have a completed or partially completed 1099 that is incorrect, voiding it provides you a way to cancel out a single form that is on the same sheet of paper as other 1099 forms. This simple solution avoids the need to redo or reprint all of the other 1099 forms.

How to request a 1099 extension

If you plan ahead, you can request a 1099 extension; however, this must be done before the filing deadline. You cannot avoid 1099 late filing penalties by requesting an extension after the deadline. The method used to request the extension depends on what you need the extension for.

Requesting an Extension to Provide Recipient Copies

To request an extension related to providing 1099 copies to recipients, you must send a letter to the IRS explaining why the extension is needed. Along with the reason for the extension, you must provide information about each recipient. The required information is available on the IRS website.

Requesting an Extension to File 1099s With the IRS

To request an extension to file your 1099s with the IRS, you must complete and submit Form 8809. It must be postmarked before the filing deadline. This provides an automatic 30-day extension. If you need an additional 30 days, another request may be filed, but it will not be automatically granted.

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