Many tax and accounting firms face a busier reporting season due to new Form 1099 reporting rules, CPA Practice Advisor reported.

The deadline for employers to send 1099 forms to contractors (or others defined as nonemployees), and also to report that information to the IRS and other agencies, was Jan. 31.

Many small business owners or operators may be unaware that, as of this year, any entity filing 10 or more Form 1099s must file these forms electronically. Starting next year, the IRS is likely to finally implement even lower dollar-amount thresholds for when businesses must prepare and submit form 1099-Ks, which could result in tens of millions of additional 1099 forms needing to be prepared and reported.

The IRS has sent notices to the largest filers, but those who fail to comply with the electronic filing requirement will receive notices, and may also face fines or penalties relating to those errors, Lynnae Robinson, a partner at RubinBrown, told CPA Practice Advisor.

Many smaller enterprises are still used to manual compliance, which is tedious and prone to errors, and they may not have realized the value of seeking professional assistance. “With many of our smaller, family-owned client businesses, some have been more comfortable doing things in a more manual way,” Robinson said. “So, we’ve had to proactively educate them and encourage them to embrace a new system and let them know we can help them assure compliance.”

She also noted that some clients are asking for guidance after having received notices from the IRS or reading of the pending e-filing and threshold changes. 

The IRS’s changing of the reporting requirements for 1099-Ks means an increase in the number of 1099-Ks needing to be processed and reported by each of these entities, with a corresponding increase in the threat of errors, fines and audits, according to CPA Practice Advisor. The fines can range from $60 to $310 per form for late filing.

Robinson advises that businesses with more than 10 form 1099s this year that are late in filing or that file incorrectly (on paper, instead of electronically), should get in contact immediately with their accounting firms.

“It’s best to make an attempt to file properly,” she said. “While there could be penalties for filing late, the IRS could also assess penalties for filing via the wrong method (such as paper, rather than electronically). If I were in that position, I would exhaust all efforts to file correctly and timely.”