What’s different this year?
in 2020 the IRS unearthed the Form 1099-NEC for reporting nonemployee compensation payments. This means businesses can no longer report nonemployee compensation amounts in Box 7 of Form 1099-MISC.
Since the Box 7 amounts were moved to the new NEC form, the IRS redesigned the 1099-MISC form too. In addition to renumbering the boxes on the form (after Box 7), new reporting requirements were added for a couple of scenarios.
Further, Form 1099-NEC is now included in the combined federal state filing (CF/SF) program. However, many states have released direct state reporting requirements for Form 1099-NEC information. This is especially impactful to businesses because in the past they could include that information in the single file that they submitted to the IRS. Now, businesses will need to create separate technical files as well submit each of them separately to each state that requires direct filing of the information.
When preparing for your 10-series forms year-end reporting, consider the following:
There are a range of preparations and mitigations businesses can put into action. Among the most important steps to be taken are to:
- Tracking due dates
- Communicating due dates to partners and stakeholders
- Testing data quality
- Testing all outputs
- Balancing withholding amounts before filing
- Filing extensions
- Communicating changes to recipients
- Balancing file data
- Protecting recipients private information
One of the biggest issues that we see in tax reporting is organizations that treat this as a once-a-year obligation. Organizations that wait until the end of the year to begin preparing for the busy month of January often find themselves working long hours, mailing out incorrect tax information and filing corrections and amended corporate returns. Protect your organization while reducing time spent by treating your 1099 tax information reporting process as a year-round responsibility.