The IRS requires that you complete and send a 1099-NEC form to any independent contractors or businesses to whom you paid $600 or more for services performed for your private practice by January 31. If you miss filing a 1099-NEC by the deadline and fail to provide a copy to your contractor, there can be several consequences depending on when you eventually file and how late the submission occurs.
Penalties for Late Filing with the IRS
The IRS imposes penalties based on how late the form is filed. The later you file, the higher the penalty:
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Filed within 30 days of the deadline (by March 1, 2025):
- The penalty is $60 per form.
- Maximum penalty: $664,500 per year for large businesses; $232,500 for small businesses.
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Filed after 30 days but before August 1, 2025:
- The penalty is $130 per form.
- Maximum penalty: $1,993,500 per year for large businesses; $664,500 for small businesses.
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Filed after August 1, 2025, or not filed at all:
- The penalty is $330 per form.
- Maximum penalty: $3,987,000 per year for large businesses; $1,329,000 for small businesses.
Penalties for Not Providing a Copy to the Contractor
You are also required to provide your contractor with their 1099-NEC copy by the same January 31, 2025, deadline. If you fail to do so, you could face separate penalties:
- The same penalty schedule (as above) applies if you do not provide the form to your contractor on time or at all.
- Contractors may also face delays in filing their taxes if they don’t receive the form, which can lead to other complications.
Additional Considerations
- Increased IRS Scrutiny: Failing to file a 1099-NEC could lead to additional scrutiny from the IRS, potentially increasing your likelihood of an audit. The IRS matches the income reported on a contractor's return with the 1099 forms they receive, so discrepancies may trigger an investigation.
- Potential Impact on Your Contractor: Your contractor may not be able to file their taxes properly without the 1099-NEC form, which could cause delays or errors in their tax filings. This could lead to penalties or fines if they file incorrectly or late.
Steps to Take if You Miss the Deadline
If you realize you’ve missed the January 31 deadline, it’s important to file the form as soon as possible to minimize penalties. You can also notify your contractor immediately to prevent any issues on their end. The sooner you correct the oversight, the lower the potential penalties and consequences will be.