The Internal Revenue Service requires filing of information returns by persons making certain payments, generally in the aggregate of $600 or more, to others in the course of a trade or business. An information return must be filed in the following cases:
- You paid $600 or more in commissions, fees, and other forms of compensation for services performed by nonemployees.
- You paid at least $10 in interest, dividends, royalties, or broker payments in lieu of dividends or tax-exempt interest.
- You made payments of $600 or more to attorneys, even if incorporated.
- You paid at least $600 for:
- foreign items
- prizes and awards
- other income payments
- health care payments
- crop insurance proceeds
- cash payments for fish (or other aquatic life) you purchased from anyone engaged in the trade or business of catching fish
- or, generally, the cash paid from a notional principal contract to an individual principal or estate
The forms must show the aggregate amount of the Form 1099 payments, the name and address of the payee, the recipient’s taxpayer identification number, and other information as noted on the form. Check and verify all taxpayer identification numbers and addresses for accuracy.
Failure to file information returns by August 1,2023, can result in penalties of up to $290 per return with a maximum penalty of $3,532,500 for large businesses or $1,177,500 for small businesses per calendar year. If the failure is determined due to intentional disregard, the penalty is $580 per return with no limit on the maximum penalty.
If you are required to file 250 or more returns you must file electronically. If you fail to meet this requirement, you could be subject to a penalty of $290 per return.
If you have any questions on the information listed above, reach out to an HBK tax advisor to coordinate the preparation of required information returns.