Late last month Congress passed the Trade Preferences Extension Act of 2015 to continue the fast track of trade negotiations (TPA, etc.). However, to pay for part of the Act's provisions, the Act increased the penalties for not filing information returns (Form 1099) and the increase can be substantial in the case of multiple non-filed forms. These new penalties applies for filings after 2015.
The old law required a $100 penalty per form that was not filed (payable each for the IRS and the Taxpayer form). The new law increased this penalty to $250 per non-filed form.
If the filing was corrected within 30 subjected the filer to a $30 penalty; it is now $50. If it was corrected by August 1, the old penalty was $60, the new penalty is $100.
If the non-reporting is considered to be intentional by the IRS, the penalty jumps from $250 to $500.
As you can see, the penalties from non-filing of Form 1099s and other information returns can get very costly. If you do not file 10 form 1099s, the total penalties can easily exceed $5,000 depending on the situation.
Most accounting software has a built-in Form 1099 reporting, therefore, this should not be a costly endeavor for most farmers, but make sure to get the required information from your vendors to properly file the forms. Simply filing a form 1099 with missing required information also subjects you to possible penalties.