It’s tax season…do you know where your 1099s are?

Dr. Freelance, if I don’t receive a 1099 for each client who paid me $600 or more, can the IRS penalize me?—Infernally Ravenous Scoundrels

Dear IRS: No, as long as you pay the appropriate taxes on your paid freelance gigs, there is no penalty for not having the actual form 1099s. There’s a wide variety of common 1099-MISC issues, such as if they’re too high or low, have incorrect information, or don’t come at all. Because the rules and regulations are too complex to deal with here, I recommend that you consult the IRS.gov site or your CPA for guidance on how to handle those types of situations correctly.

But, since you’ve asked about penalties, let’s talk about something that freelancers commonly overlook: You may owe 1099s to independent contractors whom you paid $600 or more. Did you hire a graphic designer to create your web site? Did you have a freelance ghostwriter or editor for your book? Did an attorney create your LLC or secure a federal trademark on your behalf?

This page from the IRS, Instructions for Forms 1099, 1098, 5498, and W-2G, spells out the gory details, including a section about penalties, where it says failure to provide the appropriate form by the deadline could make you liable for up to $100 per information return. And don’t even consider trying to pad your expenses: Filing a fraudulent information return for payments you claim you made to another person could cost you $5,000 or more.

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