Effective for tax years beginning after December 31, 2010, if you paid 1099 contractors or vendors using payment forms other than cash or check, you need to be aware that the IRS has issued new reporting regulations for tax year 2011. These regulations will exclude payment types such as credit cards, debit cards, and those from third party payment networks, like PayPal, from the 1099-MISC form that will instead be reported on the new third party form 1099-K.
If an incorrect information return is filed, penalties are assessed based on when you file the correct return:
- $30 per information return if you correctly file within 30 days (by March 30 if the due date is February 28); maximum penalty $250,000 per year ($75,000 for small businesses)
- $60 per information return if you correctly file more than 30 days after the due date but by August 1; maximum penalty $500,000 per year ($200,000 for small businesses).
- $100 per information return if you file after August 1 or you do not file required information returns; maximum penalty $1,500,000 per year ($500,000 for small businesses)
Have questions about what should be reported on 1099-MISC and what should be reported on 1099-K? Post a comment below or contact our Tax Planning & Preparation Group at 440-449-6800.