Sort 1099-MISC forms before filing, or else…

There are three potential filing dates that apply to your 2017 Forms 1099-MISC: Jan. 31, if you reported payments to independent contractors in Box 7, or Feb. 28 or April 2, if you’re filing on paper or electronically, respectively, and not reporting payments to independent contractors in Box 7.

The IRS now says all those forms should have been sorted. If they weren’t, you may be subject to a failure-to-file penalty.

Tax year 2017: Sorting recommended. For this filing season, the IRS recommended that you sort 1099-MISC forms reporting payments to independent contractors in Box 7 from your other 1099-MISC forms.

That advice seemed to be discretionary. The consequences of not sorting, however, are now clear.

According to the IRS, if you mixed up into one batch 1099-MISC forms reporting payments in Box 7 with other 1099-MISC forms, it may treat all the forms you’ve filed as due on Jan. 31. Since your forms are now technically late, it will impose a failure-to-file penalty based on those forms. This is true, even if your forms weren’t late because you reported payments in other boxes.

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WHAT TO DO NEXT: If you receive Notice 972CG, A Penalty Is Proposed for Your Information Returns, respond and clarify the content of your submission, indicating the number of 1099-MISC forms that didn’t report payments in Box 7.

Tax year 2018: Sorting mandatory. Sorting 1099-MISC forms based on whether payments are reported in Box 7 will be mandatory for forms filed after Jan. 31, 2019. If you file electronically, you should anticipate that the IRS will reject a mixed submission with a single Payer ‘A’ Record.

Warning: You’re not off the hook if the IRS accepts your mixed transmission; you may still receive a Notice 972CG and a late-filing penalty assessment.

Paper filers don’t escape, either. A mixed submission under one Form 1096 will also garner a Notice 972CG and a late-filing penalty assessment.

Recipient statements. Form 1099-MISC recipients can receive one form that reports payments in multiple boxes.