Your Guide to 1099-MISC
A 1099-MISC Form is essential to fill in if you own a small business, are self employed or are working in a business. This form records different types of incomes that include rents, royalties and non-employee compensations. While being a part of a business, it is important to submit a duly filled in report of the 1099-MISC Form to the Internal Revenue Service as well as the person or the business that you have made payments to. The reason behind filling in a 1099-MISC Form is to show the stakeholders about who should be claiming the income if you are planning to claim the payments made as a tax-deductible expense of the business.
This form makes an important part of the business legalities in the United States, which holds serious penalties for anyone who fails to file their 1099-MISC Form on timely basis. Nevertheless, before taking about the penalties, it is important to know the requirements that you need to fulfill while filling in a 1099-MISC Form.
While filling in your 1099-MISC Form, it is important to note that you have the following requirements fulfilled, as they make up few of the compulsory clauses in the submission of the form. Firstly, before making any kind of agreement and transaction with a sole proprietorship or a self-employed person, it is important that you note down their Taxpayer Identification Number (TIN).
The TIN is also known as the federal Employer Identification Number (EIN) or the sole proprietorship’s Social Security Number. Moreover, before making any kind of agreement or getting started with the task in mind, it is important that the W-9 form is filled out with the sole proprietor owner or the person you are planning to make the deal with. The W-9 form basically states the legal name, address and the TIN of the vendor which makes it easier for you to fill in the 1099-MISC forms.
As mentioned earlier, the 1099-MISC form makes one of the most important legality in the functioning of a business that makes it essential for a firm to keep a track of all the payments and transactions made during the year with sole proprietorships or a self-employed person. Otherwise, the penalties may become stricter if the period of not submitting the 1099-MISC form prolongs. The fine for late submission of forms ranges from $30 to $100. This makes a total fine of $100 for not submitting each 1099-MISC form, multiplying this amount with the number of forms required to be filled in by a company will let us know the total amount of the fine payable.
Apart from this, it is also very important to ensure that each detail filled in is accurate. The usual date to correct any errors in the forms is by 1st of the August. However, if at times even a slightest error is not taken care of, it might result in a fine of at least $250. Therefore, it is essential that you make sure all the information provided in the form is absolutely correct and it is submitted before the deadline; otherwise the penalty amount is expected to reach thousands of dollars easily.