J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

40.5 Reporting Certain Payments and Receipts to the IRS

In certain situations, you are required to report payments and receipts to the IRS. If you fail to comply with this reporting, you can be penalized.

Payments to independent contractors.

If you pay independent contractors, freelancers or subcontractors a total of $600 or more within the year, you must report all payments to the IRS and the contractors on Form 1099-MISC. Furnish the contractor with the form by January 31, 2013, for the 2012 payments. You must file the form with the IRS by February 28, 2013 (April 1, 2013, if you file the form electronically).

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Caution

Reporting Requirements for Merchant Transactions

Banks and credit card processors report to the IRS all credit card and electronic payments (including PayPal) of merchants. Exempt from reporting are “small” merchants (those with no more than $20,000 in total payments involving 200 or fewer transactions).

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The penalty for not filing or filing late depends on the extent of tardiness. For example, the penalty is only $30 per information return if you miss the due date but then file correctly within 30 days. The maximum penalty can go as high as $75,000 for a small business, which includes a self-employed individual with average annual gross receipts for three years of $5 million or less.

Receipts of cash payments over $10,000. ...