Every trade or business must file information returns (Forms 1098 and 1099) for each year that certain payments are made to non-corporate recipients. A 1099 form is generally not needed for payments to corporate vendors other than attorneys and corporations providing medical and health care services.
Small Business Reports
The two most common information returns for most small businesses are Forms 1099-INT and 1099-MISC. Interest paid in the course of a trade or business is reported on 1099-INT when the amount paid totals $600 or more to any payee. Interest payments of $10 or more by financial entities must be reported on Form 1099. The 1099-MISC is used to report payments of rents or services of $600 or more in any one year to a payee.
Typical payees for whom you might need a 1099 would be cleaning services, contractors, consultants, web designers, and professional services. Most small businesses have at least a few non employees to whom they have paid $600 or more during the year.
Consequences for Not Filing Your Forms
The penalties for failing to file Forms 1099 range from $30 to $100 per form, depending on how late your filing is and whether or not the failure to file was intentional. Total penalties can go as high as $500,000 for businesses with gross receipts under $5 million, or $1.5 million for those with gross receipts over $5 million.
Information returns are to be given to payees by February 2, 2015, and copies are to be mailed to the IRS by March 2, 2015. The IRS due date is extended to March 31, 2015, for electronically filed returns.