Starting in 2017, hefty increases in the penalties imposed apply if a payer fails to timely file an information return, fails to include all information required to be shown on an information return, or includes incorrect information on an information return (including all variations of Form 1099). The new penalties run as high as $250 per information return, with maximum total penalties of $1,000,000 for certain small businesses and $3,000,000 for all others.
Generally, any person, including a corporation, partnership, individual, estate, and trust, which makes reportable transactions during the calendar year, must file information returns to report those transactions to the IRS. However, a payer does not need to file Form 1099-MISC for payments not made in the course of the payer’s trade or business. A payer is engaged in a trade or business if it operates for gain or profit.
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