1099 Penalties

 Effective with returns due after January 1, 2016, penalties for not filing correct information returns and/or not furnishing correct payee statements have increased and are now subject to inflationary adjustments.

Failure to file a correct information return by the due date and you cannot show reasonable cause, you may be subject to a penalty.

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The penalty applies if: 

• you fail to file timely (see listing of due dates), or

• you fail to include all information required to be shown on a return, or

• you include incorrect information on a return, or

• you file on paper when you were required to file electronically, or

• you report an incorrect TIN or fail to report a TIN, or

• you fail to file paper forms that are machine readable.

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The amount of the penalty is based on when you file the correct information return.

If you do not file corrections and you do not meet any of the exceptions to the penalty, 

the penalty is $270 per information return.

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Penalties for Small Businesses 

(businesses with average annual gross receipts for the 3 most recent tax years of $5 million or less)

• Not more than 30 days late - $50 per information return; maximum penalty $191,000 per year 

• After 30 days late, but before August 1 - $100 per information return; maximum penalty $547,000 per year 

• After August 1 or not at all -  $270 per information return; maximum penalty $1,094,000 per year 

• Intentional disregard - $530 per information return; no maximum penalty

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Penalties for Large Businesses & Government Entities

• Not more than 30 days late - $50 per information return; maximum penalty $547,000 per year 

• After 30 days late, but before August 1 - $100 per information return; maximum penalty $1,641,000 per year 

• After August 1 or not at all -  $270 per information return; maximum penalty $3,282,500 per year 

• Intentional disregard - $530 per information return; no maximum penalty

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Exceptions to the Penalty

You may fall into an exception if you faced mitigating circumstances and act fast to solve the issue. Here’s the IRS list of acceptable exceptions:

• The penalty will not apply to any failure that you can show was due to reasonable cause and not to willful neglect. In general, you must be able to show that your failure was due to an event beyond your control or due to significant mitigating factors. You must also be able to show that you acted in a responsible manner and took steps to avoid the failure.​

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• An inconsequential error or omission is not considered a failure to include correct information. An inconsequential error or omission does not prevent or hinder the IRS from processing the return, from correlating the information required to be shown on the return with the information shown on the payee's tax return, or from otherwise putting the return to its intended use. Errors and omissions that are never inconsequential are those related to (a) a TIN, (b) a payee's surname, and (c) any money amount.

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• De minimis rule for corrections. Even though you cannot show reasonable cause, the penalty for failure to file correct information returns will not apply to a certain number of returns if you:

  • Filed those information returns timely,

  • Either failed to include all the information required on a return or included incorrect information, and

  • Filed corrections by August 1.

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If you meet all the conditions in (3) above, the penalty for filing incorrect returns will not apply to the greater of 10 information returns or 1/2 of 1% of the total number of information returns you are required to file for the calendar year.

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also see

Who Must File 1099's?

Form W-9 Requirements

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