Dec 18 FORM 1099 FILING INFORMATION
The 2020 year did not change any 1099 filing requirements, but introduced a new form, the 1099-NEC. It is important that employers review and understand the compliance procedures. Not only will employers face steep penalties for non-compliance, they will also be required to provide details about the 1099s on their business tax return.
Below are general guidelines to assist in preparing and filing 1099s for 2020.
1099 reporting is required on a calendar-year basis and includes the payee’s name, address, social security or employer identification number, as well as the amount paid and any related federal income tax withheld.
In order to obtain the social security number or employer identification number from a vendor, use the Form W-9 (Request for Taxpayer Identification Number and Certification) with a revision date of October 2018. This form meets IRS requirements while the earlier versions do not.
This is a summary and transmittal form required to accompany the separate information returns when they are sent to the Internal Revenue Service. A separate 1096 is required for each type of 1099 return sent. Additional information and instructions can be found on the Forms & Publications page of the IRS website.
Form 1099-NEC, Nonemployee Compensation
This is a new form for 2020. It effectively replaces the information previously reported in box 7 of the 1099-MISC. This form must be filed by a payor who, in the course of conducting a trade or business, makes payments during the calendar year totaling $600 or more to any payee for a service. The most common types of payments reflected on this form are health and medical services (including veterinarians), payments to non-employees, and attorneys’ fees. This form is only required to be sent to non-corporations with the exception of attorneys who should receive the form for all payments made to the attorney for services.
1099-MISC, Miscellaneous Information
This form has been revised for 2020, changing box 7 to a check box for direct sales. The other boxes have been renumbered as well. It reflects payments made during the calendar year in totaling $600 ($10 in the case of royalties) or more. The most common types of payments to be reflected on this form are rents, royalties, medical and health care payments (including veterinarians), and gross proceeds to attorneys. Payments for medical and health care and gross proceeds to attorneys are reported even if the entity is a corporation.
This form reflects distributions from pensions, annuities, IRAs, etc. Both distributions made to individuals and those made directly to IRAs or other qualified plans are required to be reported.
All dividends of $10 or more are reported on this form. For distributions from S corporations, only those dividends paid out of accumulated earnings and profits should be reported.
Interest payments of $10 or more are reported on this form. Interest payments to corporations are not required to be reported.
Keep in mind that the 1099s must be submitted to the recipient by January 31, 2021. Generally, the Form 1096 accompanied by the Forms 1099 must be submitted to the Department of the Treasury by February 28, 2021. The Form 1099-NEC along with the 1096 are due to the IRS by January 31, 2021.
Electronic Filing – Federal
If your company is filing more than 250 forms of the same type, they are required to be filed electronically.
Electronic Filing – New Jersey
New Jersey has mandated electronic filing of forms 1099 beginning with the 2020 filing year. If you use a payroll service to prepare your 1099s, we suggest you confirm with them that they will be filing them electronically on your behalf.
If you file these forms directly, you can do it using either:
- The NJ site used to file the other NJ forms (927, WR-30). There is a separate section for the W-3 filing. Once you select that, there will be an additional selection for completing the W-2 electronic filing.
- The NJ secure electronic bulk filing service using Axway. You can get additional information on using this method under “Informational Returns”.
For further information, please contact Sax advisor Alan S. Isaacs, CPA, MBA at [email protected].