Heads up, Finance: Lawmakers snuck a reporting change into a recent trade bill, and it holds some harsh year-end news for your department.
The penalties for failing to file correct information returns — including 1099s– are going through the roof.
Here’s what you’ll face when the new law kicks in on Jan. 1, 2016:
- failure to file a correct info return and provide payee statement: $250 per return (up from $100)
- filing a correction within 30 days: $50 (up from $30)
- filing a correction on or before Aug. 1: $100 (up from $60), and
- filing a correction after Aug. 1: $250 (up from $100).
Keep in mind: All of these changes will impact this year’s 1099s.
Accuracy is essential
Of course, the easiest way to avoid the penalties is to make sure you have everything right the first time around.
Here’s how you can keep your year-end accuracy at an all-time high:
- Get familiar with the updates for 2015 filing. IRS recently released a draft form of the instructions for filing 2015 1099s. While this isn’t the final form, it’s never too early to get acquainted with the updates.
- Check for changes throughout the year. Some of our readers touch base with their vendors periodically to see if any changes have occurred – like an acquisition – that could impact a vendor’s W-9 information.
- Use IRS’ TIN matching tool. While it takes some time to set up, it’s worth it. This tool lets you check thousands of TINs at once – and printing the results counts as doing your due diligence.
- Prepare earlier. Prepare smarter. Give your team some extra cushion by starting year-end early to beat the Feb. 29 deadline in 2016. For an extra advantage, a few of our readers enlist the help of their accounting counterparts for help with manual year-end tasks, like stuffing envelopes.
And while the instinct is to move fast, remember that speed breeds mistakes.