All types of businesses are subject to reporting earnings on the 1099 form series. Tax information reporting 1099s can be a complex process, especially when you must report more than one type of 1099 form. There are also many different parts of the reporting process that can be confusing, including knowing what 1099s to report, the differentiating due dates, accounting for state filings and more. In this blog we will break down all the basics of tax information reporting.
What is tax information reporting?
Tax information reporting is the reporting of wage and non-wage payments made from businesses to employees, contractors and other recipients made throughout the course of a calendar year. Businesses are subject to report this information federally to the IRS and to any state jurisdictions they have reporting obligations in.
The U.S. government is largely funded on individual income taxes. That is, taxes reported on forms like Form W-2, 1099-MISC, 1099-NEC, 1099-K, etc. The taxes being reported on these information forms bring in over 49% of the government’s revenue, totaling over $1.83 trillion dollars. Businesses in all different industries may need to report one or more Form 1099, depending on the services performed. Tax information reporting can become a complex process because each form has guidelines to when it needs to be reported to the IRS and state jurisdictions.
What are the most common tax information reporting 1099 form types?
There are over 30 different 1099 forms that are reported to the IRS and states each year, and each form reports a different type of income. Some of the most common form types are:
- 1099-D: Reports distributions such as dividends, capital gain on investment or nontaxable distributions paid on stocks or liquidation distributions.
- 1099-INT: Reports interest earned. For example, if you earn money in a savings account, cash in a savings bond, etc.
- 1099-K: Reports payments from payment card or third-party network transactions. For example, as a driver for a ride-share company, those funds would likely be reported on the 1099-K form.
- 1099-MISC: Reports rents or royalty payments, prizes and awards that are not for services, payments to a physician, gross proceeds to attorneys, etc.
- 1099-NEC: Reports payments for services performed for a trade and/or business by contractors or other individuals not treated as employees (prior to 2020, this amount would have been reported on 1099-MISC, box 7).
- 1099-R: Reports distributions from pensions, annuities, retirements, and other retirement accounts.
- 5498: Reports all contributions to any individual retirement arrangement (IRA).
When are 1099 forms due to recipients? What about the IRS?
The majority of 1099 forms will be due to recipients at the end of January, with 1099-B and 1099-S being the outliers. This is because recipients need all of their tax information to file their own individual tax returns.
When transmitting forms to the IRS, the majority of forms are due by March 31, except the 1099-NEC and Form W-2, which are both due to the IRS on January 31. These due dates are if your business electronically files with the IRS. If you submit paper files, due dates for 1099 forms will be earlier.
The expansion of electronic filing
In recent years there has been a large increase in electronic filing mandates at both the federal and state level for tax information reporting. For 2023 reporting, IRS release T.D.9972 states that all organizations that file 10+ information returns must do so electronically. This includes Forms W-2, 1099, 1095, 1042-S and more.
When businesses electronically file their tax information, it allows the IRS to get the information must faster than they would via other filings methods (i.e., paper, CD, etc.). The expansion of electronic filing has been happening for many forms over the past decade and is expected to continue for state reporting obligations.
1099 direct state reporting
Tax information reporting does not only happen with the IRS. Over 40 states have reporting obligations for one or more 1099 form. State reporting for 1099s can get much more complex than filing with the IRS. This is because when filing with the IRS, you only need to pay attention to one due date, filing method and threshold per form. With direct state reporting, each state has the ability to set different due dates, filing methods and thresholds for every 1099 form.
Take Action
Watch our recent webinar, 1099 Reporting Basics, to learn more about what your business must do to stay compliant.
