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IRS Filing Tips

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Be aware of this potential IRS penalty trap

Certain groups of IRS information returns must be filed electronically with the IRS if the total number to be filed annually exceeds 250 forms. The penalty is $50 a year for each form over 250 forms not filed electronically. For example, 350 forms minus 250 forms equals 100 forms X $50 for each total civil penalty assessment of $5,000.

The electronic filing requirement is for each type of information forms. For example, if the taxpayer has 225 Form 1099 MISC to be filed, then these 1099 MISC forms must be filed electronically.

If the same taxpayer also has 100 Forms 1099 INT, the 1099 INT Forms do not have to be filed electronically. They can be paper filed.

Among the most common information forms that should be filed electronically are:

  • Form 1098 – Used to report to the payee the amount of annual mortgage interest paid. Form 1099 MISC – Used if the amount to be paid to the payee annually is at least $600. Some of the items/payments reported on this form include payments for rents, contract services (not employee wages), medical and health care, attorneys’ fees, etc.
  • Form 1099 INT – Used to report interest income of $10 or more.
  • Form 1099 DIV – Used to report dividend income of $10 or more. If there are qualified dividends, be aware that there may be a need to report the detail of the ordinary dividend, capital gains and exempt dividend amount(s).