Cannabis Knowledge & Insights

Filing 1099s on Time: Why it’s Important for Business Owners

What is a 1099?

A 1099 form reports non-employee compensation to the IRS. It is required for any individual or entity paid $600 or more in a calendar year for services. Failure to file 1099s on time can result in significant fines and penalties for business owners personally, regardless of entity structure

Compliance with Tax Laws and Regulations

The IRS requires that 1099s be filed by the end of January for the previous calendar year. Failing to file on time can result in penalties ranging from $50 to $280 per form, depending on the time of filing and the number of forms that are late. In addition, some states have their own laws regarding 1099s, resulting in penalties at the state level as well.

Maintaining Accurate Records and Financial Statements

The information reported on 1099 forms is used to verify income reported on personal tax returns. If a business owner fails to file a 1099 form, the individual or entity may still report the income, leading to discrepancies. This can result in additional fines and penalties for the business owner, and increased risk of an audit.

Managing Vendor and Contractor Relationships

Many individuals and entities rely on the information reported on 1099 forms to prepare their own tax returns. Failing to file on time causes delays and inconvenience, damaging the relationship between the business and the vendor or contractor. 

How do I file?

When it comes to filing, business owners have a few options. Some payroll providers will complete 1099s as part of their service. Business owners can also file with the IRS and send vendor and contractor copies out themselves. If a business owner doesn’t have the time to prepare these forms, they can hire a CPA to help.

GreenGrowth CPAs can help you with any of your 1099 needs, click below to get a quote.