Each year, experts strongly advise businesses to file W-2 and 1099 forms, correctly and on time. But why is it so important to do these things and do them right?
In recent years, the IRS/SSA, and most states, have moved W-2 & 1099-NEC deadlines to January 31. And, failure to file on time can be extremely costly, for most businesses. The federal government requires a business to file W-2 forms with the Social Security Administration (SSA) for each employee and 1099-NEC forms with the IRS for non-employee compensation. Also, copies need to be sent to recipients with a postmark date that is earlier than or coincides with the filing deadline, January 31 in most cases. This means a tight turnaround time to get W-2 and 1099 forms out to the IRS & SSA before the January 31 deadline.
There are penalties in place for businesses who do not file on time and who do not file to the IRS/SSA when appropriate. Those penalties include:
Failure to File Correct Information Returns to IRS/SSA:
- $50 per information return if you correctly file within 30 days; maximum penalty $588,500 per year ($206,000 for small businesses)
- $110 per information return if you correctly file more than 30 days after the due date but by August 1; maximum penalty $1,766,000 ($588,500 for small businesses)
- $290 per information return if you file after August 1 or you do not file required information returns; maximum penalty $3,532,500 per year ($1,177,500 for small businesses)
Note: Intentional disregard of filing requirements—If any failure to file a correct information return is due to intentional disregard of the filing or correct information requirements, the penalty is at least $580 per information return with no maximum penalty.
As a business, it is vital to also think about your employees and contractors. If you are late sending out W-2 or 1099 forms, or forget to file, that leaves employees upset and potentially unable to file their own taxes on time. These setbacks for them could lead to additional headaches for your business and take away from precious work hours if employees/contractors are dissatisfied with your W-2/1099 process.
The bottom line: your business could be penalized if you do not adhere to filing deadlines and best practices. Your employees/contractors could also end up paying the
