Failure to file information returns can be very costly. If you don’t bother to file 25 1099-MISC forms for independent contractors, you will find yourself owing $1250 – $50 per missed return.
The Obama budget proposals would double the information return penalties:
The first-tier penalty would be increased from $15 to $30, and the calendar year maximum would be increased from $75,000 to $250,000. The second-tier penalty would be increased from $30 to $60, and the calendar year maximum would be increased from $150,000 to $500,000. The third-tier penalty would be increased from $50 to $100, and the calendar year maximum would be increased from $250,000 to $1,500,000. For small filers, the calendar year maximum would be increased from $25,000 to $75,000 for the first-tier penalty, from $50,000 to $200,000 for the second-tier penalty, and from $100,000 to $500,000 for the third-tier penalty. The minimum penalty for each failure due to intentional disregard would be increased from $100 to $250. The proposal would also provide that every five years the penalty amounts would be adjusted to account for inflation.
The new penalties would take effect in 2011.
The proposals would expand 1099 reporting to rental businesses employing independent contractors. They would also require businesses to issue 1099s to corporations; currently 1099s are issued only to individuals, partnerships and lawyers. These proposals would take effect in 2010.
