Renner Business News; December 8, 2022 — Paul Kentes, Manager
Whether you are a business owner, employer, self-employed, the director of a nonprofit organization, or in charge of an estate or trust, getting ready for 1099 season is probably at the bottom of your list of things to do.
With the holidays quickly approaching, adding one more thing to your plate does not sound very appetizing. But then again, neither does paying late filing penalties to the IRS. Remember, the IRS “charge(s) penalties for each information return you fail to correctly file on time and each payee statement you fail to provide.” That means, depending on the nature of your business, late filing penalties could get costly. However, that does not necessarily mean that the IRS wants to penalize you.
In this article, we will discuss the following:
- What’s new?
- Do I need to issue 1099s?
- When to file and furnish?
- Where to file?
- Electronic reporting
- 30-Day Extensions
- Streamline your future
Electronic filing of Forms 1099. “Under section 2102 of the Taxpayer First Act the IRS is developing an Internet portal that will allow taxpayers to electronically file Forms 1099 after December 31, 2022.”
Do I need to issue 1099s?
If you have paid vendors or nonemployees at least $600 during the calendar year then the answer is likely, yes.
Below is a summary of the four most common types of 1099 forms, the types of transactions that would require you to issue and file to the IRS, and their filing deadlines.
|1099-MISC | Paper File by Feb. 28, 2023 | |
E-File by March 31, 2023
– Attorney, fees and gross proceeds
– Direct sales of consumer products for resale
– Directors fees
– Fishing boat crew members proceeds
– Fish purchases for cash
– Health care services
– Indian gaming profits paid to tribal members
– Medical services (including payments to veterinarians)
– Punitive damages
– Substitute payments in lieu of dividends or tax-exempt interest
|1099-NEC (Non-Employee Compensation) | |
Paper and E-file by Jan. 31, 2023
– Auto reimbursements
– Car expense
– Golden Parachute
– Nonemployee compensation
– Vacation Allowance
|1099-S | Paper File by Feb. 28, 2023 ||
E-file by March 31, 2023
– Real estate transactions
1099-C | Paper File by Feb. 28, 2023 |
E-file by March 31, 2023
– Cancellation of debt
– Discharge of indebtedness
When to File and Furnish?
Generally, the IRS requires that all Copies A of all paper Forms 1099 and 1096 transmittal forms be filed on paper or electronically on or before Jan. 31, 2023. Filing after Jan. 31 without a 30-day extension could result in a late filing penalty. Keep in mind that “you must send one Form 1096 for each type of form as the transmittal document.” This 1096 transmittal document should be mailed to the IRS on the appropriate red forms on or before Jan. 31, 2023 via certified mail. Copies B of Forms 1099-NEC must be furnished to recipients by Feb. 15, 2023.
30-Day Extension? Yes, you read correctly. Follow along to learn more about the 30-day extension for Forms 1099.
Where to file?
That depends on the location of your principal business, office or agency, or legal residence in the case of an individual. Below are the IRS mailing addresses for D.C., Maryland, and Virginia:
- District of Columbia, Maryland: Department of the Treasury IRS Submission Processing Center, 1973 North Rulon White Blvd., Ogden, UT 84201
- Virginia: Internal Revenue Service, Austin Submission Processing Center, P.O. Box 149213, Austin, TX, 78714
As mentioned above, provision 2102 of the Taxpayer First Act requires the IRS to develop an internet portal by Jan. 1, 2023, that allows taxpayers to electronically file ALL Forms 1099. Electronic filing of these Forms can be done through the IRS Filing Information Returns Electronically System or (FIRE) for short. Check out www.irs.gov/FIRE to learn more. If you are filing 250 or more Form 1099s, you are required by the IRS to file electronically. Keep in mind that the 1096 transmittal forms for each type of 1099 are still required to be mailed to the IRS.
The IRS allows for an automatic 30-day extension for filing most 1099 returns. The application for this type of extension is called Form 8809 and can be found on the IRS website. If you already know that meeting the filing deadlines is going to be difficult for you, this may be an option to consider. For the most part, this automatic 30-day extension is available for all Forms 1099 and can be paper filed or E-Filed through the IRS FIRE System.
However, there are no automatic extensions for Form 1099-NEC. To qualify for a 30-day filing extension for Form 1099-NEC, you must meet very specific criteria. So unless you have suffered from a catastrophic event in a federally declared disaster area, died, are seriously ill; or there has been a fire, casualty, or natural disaster, which has affected your operations, or you are in your first year of establishment, you may not qualify for a 30-day extension of Form 1099-NEC. Additionally, Form 8809 must be paper filed for requests pertaining to Form 1099-NEC.
Do not forget that separate extensions are required for each type of Form 1099 you are filing.
The IRS recommends you file Form 8809 as soon as you know an extension of time to file is necessary, but not before Jan. 1 of the year in which the return is due.
Streamline Your Future
- Make it a policy to have every new vendor provide you with a completed W-9. The information on Form W-9 will help you determine if the vendor is required to receive a 1099 and, if so, it will have all the business information necessary to prepare the appropriate 1099. Trust me, your accountants will thank you.
- If a vendor or nonemployee does not provide you with a completed W-9 or provides you with an erroneous Taxpayer Identification Number, the burden of responsibility to withhold backup withholdings tax from their pay falls on you. In most cases, vendors and nonemployees are quick to get you their W-9 when you tell them that you cannot remit payment until this form is received with complete and accurate information. If you do have to withhold backup tax, the rate is 24%.
- Utilize your accounting software. Most accounting solutions, like QuickBooks Online, allow you to mark vendors as 1099 recipients, making your life easier at year-end when your accountant asks you to send them the 1099 recipient list and qualifying amounts paid.
- Vendors paid via credit card. Any vendor who is set up to accept credit card payments will receive a 1099-K from their Credit Card Merchant Processor.
- Utilize your payroll provider. Not many people realize this, but your payroll provider can issue payments to nonemployees as well as handling the 1099 filing at year-end.
I hope this article is helpful to you this 1099 season. It is easy to justify putting off the prep work for 1099 season. Do not set up future you for stress and late filing penalties. The only thing hanging over your head this holiday season should be the mistletoe.
Contact us with your questions any time.
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