Are you required to file yet another form with the IRS?
As usual, the IRS has made changes that will affect your business filing of 1099 forms for contractors this year. In prior years, unless you’re as old as I am, you filed a 1099-MISC for your independent contractors and rent payments.
This year the IRS has revived the 1099-NEC, which was last used in the early 1980s. This form is only for independent contractors who have received $600 or more in payments from your business during 2020. It is due by the end of January, but since the 31st of January is a Sunday, it will be due February 1, 2021. The reason for the switch is the IRS cannot match earned income for taxpayers claiming the Earned Income Credit in January and February if the 1099-MISC is not filed until the end of February, so it has passed off its own work of catching fraud in the Earned Income Credit filing of taxpayers who work in unincorporated businesses to business owners like you.
Taxpayers who may be affected by this new change include those with rental properties, a Schedule C, Schedule E, Partnership, or an S Corporation. Fortunately, the 1099-NEC is very simple to complete, but does require that you have the Name, Address, Taxpayer Identification Number (TIN), and the total you paid to the independent contractor in 2020. If you do not have this information, now is the time to collect it. The penalty for filing these forms late is $50 each if filed by the end of February, $110 per form if filed by April 1, and $280 each if you don’t file them at all.
It appears as if some of the more common accounting programs still do not have the form available, so if you need forms and you want to prepare your own, you will need to order them quickly or work on-line to print them from the IRS website. For our clients are more than happy to provide the forms and help you prepare them, but you will need to collect the information from your independent contractors and get it to us the first week of January.
If you have questions or need additional information, please call the office or e-mail us with your questions and we will help you resolve any issues.