The holidays have passed, year-end work is in full swing, and 1099 reporting deadlines for 2020 are right around the corner.
Given the pandemic, this tax season likely feels and looks a lot different than year-ends past. And as CFO, you’re working hard to support your finance staff and guide them toward success.
Still, you may want some extra peace of mind before sending out 1099s. Review and share these two lists of IRS changes and IRS reminders, as presented by finance expert Mark Schwartz in a new Premier Learning Solutions Workshop:
IRS changes
The major changes for this year-end include:
- Form 1099-NEC. As finance pros know by now, nonemployee compensation was removed from the 1099-MISC and put on the 1099-NEC. You should report payments of $600 or more for services of nonemployees and attorneys in Box 1 of the 1099-NEC – not Box 7 of the 1099-MISC. As for deadlines, 1099-NECs are due to recipients and IRS by Feb. 1, 2021 (both paper filing and e-filing).
- Form 1099-MISC. The 1099-MISC was adjusted to eliminate the input of a dollar amount into Box 7. Plus, many other box numbers were rearranged. You should still report payments of $600 or more for rent, prizes and awards, gross proceeds to attorneys, certain medical and healthcare payments and royalties over $10 on the 1099-MISC. These are also due to recipients by Feb. 1, 2021 – but they’re due to IRS by March 1, 2021 (paper filing) or March 31, 2021 (e-filing).
- E-filing threshold. Remind your staff that IRS recently modified the threshold for the required e-filing of most information returns, including 1099s and W-2s. The threshold is 250 or more forms for tax year 2020. Then it’ll be 100 forms for tax year 2021 and 10 forms for tax year 2022.
- Inconsistent TINs. Heads up: Filers may be subject to information return penalties if their name/TIN on forms doesn’t match the name/TIN used on their taxable 94X series return. Schwartz also reminds companies that they shouldn’t use the name/TIN of the filer’s paying agent or service bureau.
- Updated forms and instructions. Recently, IRS converted many forms and their corresponding instructions from “annual updates” to “continuous use.” (Essentially, know that they’ll only be updated as necessary). The following forms are included: 1097-BTC, 1098-C, 1098-F, 1098-MA, 1098-Q, 1099-CAP, 1099-LS, 1099-LTC, 1099-OID, 1099-Q, 1099-SA and 1099-SB.
IRS reminders
Along with the newer changes above, here are other key IRS reminders that Finance should keep top of mind this year-end:
- TIN matching. It’s projected that those who validate TIN/name combinations before filing will get fewer backup withholding and penalty notices. Tell your staff they can use TIN Matching for many forms, such as 1099-B, 1099-DIV, 1099-G, 1099-INT, 1099-K, 1099-MISC, 1099-NEC, 1099-OID and 1099-PATR.
- E-filing. IRS reminded companies that e-filing with the FIRE System requires following certain specifications each year (see Publication 1220).
- Paper filing and Form 1096. Using paper forms? Your staff must send Copies A of all paper Forms 1097, 1098, 1099, 3921, 3922, 5498 and W-2G to IRS with Form 1096, Annual Summary and Transmittal of U.S. Information Returns.
- Deadlines for certain recipient statements. Here’s a nuance you don’t want your staff to forget. The deadline for providing statements to recipients for Forms 1099-B, 1099-S and 1099-MISC with amounts in Box 8 or Box 10 is Feb. 16, 2021. This also applies to statements created as part of a consolidated reporting statement.
- Backup withholding. If your company backup withholds on a payment, you must file the appropriate 1099 or W-2G with IRS, plus send a statement to the recipient to report the amount of the payment and the amount withheld. And this applies even if the amount of the payment is below the normal threshold for filing 1099s or W-2Gs.
