Updated Publication 1220 Pushes States Towards Direct State Reporting for Form 1099-NEC

Wendy Walker
September 18, 2020

The IRS has released the 2020 version of Publication 1220. One of the most notable changes is that Form 1099-NEC (Nonemployee Compensation)—which was previously reported on Form 1099-MISC utilizing Box 7—will not be a Combined Federal/State Filing (CFS) form. This means that Form 1099-NEC cannot be filed with the states through the CFS Program. The IRS originally created the CFS Program to simplify filing for payers by allowing the IRS to automatically forward information filed in their federal information returns to participating states. This eliminated the need to file information returns directly with states in most cases. Not only did the CFS program make it easier for organizations to comply with state requirements, but states also took advantage of this program as they have historically relied on receiving nonemployee compensation payment information through the CFS program.

Not including the 1099-NEC in the CFS program was a surprising development and further complicates the implementation of the new form. Given it’s the first year for filing, payers are already dealing with making changes to core operating systems and preparing for duplicate reporting to some recipients who will now need to receive both a Form 1099-NEC and 1099-MISC for the 2020 year. Now, they also face the possibility that they will need to create and file Form 1099-NEC information directly with the states. With less than five months till this form is due to the IRS, it opens the door for states to implement different filing methods, thresholds, deadlines and form types to receive nonemployee compensation payment information. All of this will make the implementation of Form 1099-NEC and it’s evolving direct state reporting requirements exponentially more complicated for organizations still trying to manage the process manually or with antiquated technology.

For an in-depth look at the requirements for Form 1099-NEC, how it will impact your business,  and best practices for reporting this new form, watch our latest webinar.

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.

Author

Wendy Walker

Wendy Walker is the principal of Tax Information Reporting solutions at Sovos. She has more than 15 years of tax operations management and tax compliance experience with emphasis in large financial institutions, having held positions with CTI Technologies (a division of IHS Markit), Zions Bancorporation and JP Morgan Chase. Wendy has served as a member of several prominent industry advisory boards. She graduated with a BS in Process Engineering from Franklin University and earned her MBA from Ohio Dominican University, in Columbus, Ohio.
Share This Post

LATAM VAT & Fiscal Reporting
May 20, 2020
Sovos Acquires Taxweb, Extends Tax Determination Capabilities in World’s Most Challenging Compliance Landscape

Earlier this month Sovos announced its second acquisition of 2020, completing our solution for Brazil with an unparalleled offering that solves tax compliance in the place where it is most challenging to do so.  Too many companies doing business in Brazil have been burdened by managing multiple point solutions for continuous transaction controls (CTCs), tax […]

Tax Information Reporting
October 27, 2020
Tax Issues Only Going to Get Worse with PayPal Going Crypto

Starting in early 2021, PayPal customers can buy, sell and trade select cryptocurrencies using their PayPal and Venmo online wallet accounts. Shoppers will also be able to use crypto to purchase goods and services using their PayPal account, according to Reuters last week. For the 26 million merchants participating in the PayPal network, expanding payment […]

Sales & Use Tax United States
October 26, 2020
Does Florida Have Any Sales Tax Economic Nexus Changes?

Since the South Dakota v. Wayfair, Inc. decision, nearly every state has adopted sales tax economic nexus changes. However, Florida has not yet made any such changes. The Sunshine State has no remote sales tax law and does not have income tax. Some lawmakers proposed legislation that would require remote businesses with sales in Florida […]

ShipCompliant
October 26, 2020
5 Myths Surrounding Retailer Direct-to-Consumer Wine Shipping

By Tom Wark, Executive Director, National Association of Wine Retailers No one who pays attention to the ongoing political and legal battles over direct-to-consumer (DtC) wine shipping will doubt that this is a contentious area of the law. Claims concerning retailer wine shipping emerge from every corner of the regulatory landscape including the wholesale tier, […]

Sales & Use Tax United States
October 26, 2020
Understanding the New Texas Sales Tax Nexus Rules

The South Dakota v. Wayfair, Inc. decision made waves in the sales tax nexus world, with ripples being felt in every state. The Texas sales tax nexus rules were no exception, and all businesses operating in the Lone Star State – remote organizations and those with a physical presence – must ensure they stay compliant. […]

Sales & Use Tax United States
October 26, 2020
How the California Sales Tax Nexus Impacts Businesses

It is essential that California businesses – both those operating remotely and that have a physical presence in the state – understand and adhere to all sales tax nexus laws, especially when and if the laws change. Failure to comply with these obligations could impact how businesses properly collect and remit taxes, leading to audits […]