Managing Form 1099-NEC Reporting After Publication 1220

Form 1099-NEC changes in 2020

Since the IRS released Publication 1220, announcing that Form 1099-NEC—for nonemployee compensation—would not be included in the Combined Federal/State Filing (CF/SF) program starting tax year 2020, 37 states have implemented direct state reporting requirements for new Form 1099-NEC. 

Though there are 32 states that participate in the CF/SF program, the majority also require direct state reporting—many with unique formats, thresholds and due dates. 

How to manage direct state reporting

With a lack of guidance from the government and organizations struggling to manage nonemployee compensation reporting, Sovos quickly created a new direct state reporting solution in a matter of weeks. This solution provided an easy way for organizations to report directly to the 37 states that now require direct state reporting.

As the #1 private filer of 1099 forms, Sovos has already helped over 800 clients with direct state reporting, and in January alone, submitted over 2.9M 1099-NEC forms with our new solution.

Because these new 1099 reporting requirements are not going away anytime soon, Sovos’ team of regulatory analysis experts continue to monitor and interpret over 19K taxing jurisdictions worldwide. This ensures our solutions stay updated with the latest Form 1099-NEC and direct state reporting requirements from the 30+ states that are not supported in the IRS Combined Federal State Filing (CF/SF) program.

What to expect from Form 1099-NEC moving forward

There are still a lot of unanswered questions about how the IRS will handle Form 1099-NEC moving forward. However, due to the effort put into states’ direct state reporting programs, the continual increase in gig workers and the ongoing effects from the pandemic, we predict more reporting changes in the future.