North Carolina to Require 1099-NEC Reporting for TY 2020

Paul Ogawa
October 24, 2020

The North Carolina Department of Revenue recently published an important notice relating to information returns due for TY 2020: specifically, information relating to Forms 1099-NEC and 1099-MISC.

First, Form 1099-NEC will now be required for TY 2020 if the statement reports North Carolina income tax withheld. These must be filed with the department as a part of the annual Form NC-3 filing requirement on or before January 31, 2021. Filing may be done electronically or on paper using the existing information return filing requirements.

Second, the Department of Revenue made changes to their state-specific form filing requirements. Pursuant to North Carolina statute, every payer who pays more than $1,500 during a calendar year to a payee must deduct and withhold North Carolina income tax from the compensation paid to the payee. Prior to January 1, 2020, this information was reported on state forms NC-1099-ITIN or NC-1099-PS as applicable. However, for payments made on or after January 1, 2020, payers must use the new form NC-1099M, Compensation Paid to a Payee, to make these reports. The aforementioned forms (NC-1099-ITIN and NC-1099-PS) are now obsolete. Note that Federal Forms 1099-MISC and 1099-NEC may be filed instead of Form NC-1099M to report the same information.

Third, the notice extends the waiver for penalties relating to a failure by a taxpayer to file Form NC-3 and the required W-2 and 1099 returns electronically. This waiver has been in place since 2019 and will continue for the TY 2020 reporting purposes. Waivers are automatic and do not require an application or request, but those who receive a proposed assessment of the $200 penalty should contact the Department of Revenue by phone or mail.

Finally, the notice extends the waiver on filing requirements relating to 1099-MISC forms that do not report North Carolina income tax withheld. If the taxpayer properly files Form NC-3 and the 1099-MISC statement(s) at issue do not report state withholding, the waiver applies to those 1099-MISC statements.

To review this notice in its entirety, please click here.

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Author

Paul Ogawa

Paul Ogawa is a Senior Regulatory Counsel at Sovos Compliance. As part of the Regulatory Analysis team, his main areas of focus are state and federal tax withholding, the Affordable Care Act (ACA), and Canadian tax information reporting. Prior to Sovos, Paul worked as a litigation attorney in Boston area law firms, representing clients in insurance subrogation claims, family law matters, and employment disputes. Paul is a member of the Massachusetts Bar, earned his B.A. from Brandeis University and his J.D. from the Suffolk University Law School.
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