Question

Donavan is self-employed and files a Schedule C (Form 1040), Profit or Loss From Business. He paid three independent contractors more than $600 during 2022 for their services. He failed to provide Form 1099-NEC to them before February 1, 2023, but he did provide the forms before February 28, 2023. What is his penalty for failure to furnish information returns?

Answer 1

Donavan may be subject to a penalty of $150 ($50 x 3 forms) for failure to furnish the information returns.

Step-by-step explanation:

According to IRS regulations, if Donavan failed to furnish Form 1099-NEC to the independent contractors before February 1, 2023, but provided the forms before February 28, 2023, he may be subject to penalties.

The penalty amount is based on the delay in furnishing the forms and can range from $50 to $280 per form, depending on how long the delay is. In Donavan's case, since he provided the forms before February 28, 2023, the penalty amount would be $50 per form.

Therefore, Donavan may be subject to a penalty of $150 ($50 x 3 forms) for failure to furnish the information returns.