Business owners can often feel intimidated by tax forms, and the 1099 form is no exception. Often, business owners are left puzzled by the changes to rules and regulations, so they tend not to bother filing them. As this can lead to significant costly penalties, it poses a serious problem for entrepreneurs.
However, things are not quite as complicated as they may seem. It is easy to see how all the guidelines may be a bit overwhelming, intimidating, and even off-putting. Continue reading to gain a basic understanding of the 1099.
Who Must Be Issued a 1099 Tax Form?
- The general rule of thumb for Form 1099-MISC is that it must be issued to anyone who has been paid at least $600 by the employer. This includes awards, prizes, materials, parts, and other forms of payment.
- 1099s do not have to be issued for payments made by the employer for personal reasons.
- Employers are required to issue a 1099-MISC form for payments made for business purposes only.
- The forms must be sent to any partnership, LLC (Limited Liability Company), Limited Partnership, or Estate, as well as to any individual who meets the above requirements.
What Are the Penalties For Failing to Send Out or File 1099s
- If an employer fails to adhere to any of the above guidelines, they could face a fine of anywhere from $30 to $100 per 1099 form, with a maximum of $1.5 million for the entire year. This is also dependent on how far past the deadline the forms have been issued by the company.
- Those businesses that intentionally do not provide the form are subject to a minimum fine of $250 for each form, with no limitation as above.
Are There Any Exceptions?
There are actually quite a few exceptions. The most common of these is that employees are not required to issue the form for rent payments for real estate agents/property managers or corporations. However, they must issue a form to the property owners themselves. Additionally, 1099s are not required to be issued to individuals who sell freight, storage, merchandise, or other similar items.
Lawyers must be sent a 1099 if the business has paid them over $600. And if you are looking for a 1099 processing service, contact us today.
Last updated: September 2025