Form 1099 helps streamline a business’s tax filing workload by helping gather crucial information in an organized manner. How to Fill Out 1099 Forms Figuring out how to fill out form 1099 can be confusing. As a business owner, it is a necessary and important step in your tax filing, so here are some quick and easy steps to follow. Step 1: For each 1099 you fill out, you need to prepare five copies: One for the IRS One for your State Tax Department Two for the 1099 recipient (freelancer or independent contractor) One to keep in your own records Step 2: In the box at the top left of the 1099 form, fill out the information that pertains to your business (business name, address, telephone number). Under that, record your TIN and the recipient’s TIN (this can be taken from the W-9 form businesses are encouraged to collect before issuing any work or payments to independent contractors). Step 3: Skip the “account number” and “FATCA filing requirement” boxes unless your filing meets the criteria of the exceptions, found on page 5 of this document. Step 4: Fill in those boxes: Box 1 – Report all money paid as rent, except rent paid to a corporation Box 2 – Enter money paid as royalties on intellectual property or oil, mineral, or gas properties Box 3 – Here is where you will report all money paid directly to independent contractors for their work. This box includes money paid as prizes, research study incentives, punitive damages, etc. Box 4 - Leave blank Box 5 – This is only for fishing boat proceeds Box 6 – If applicable, report payment of any medical or healthcare expenses Box 7 – Check the box of it is true, leave blank if it is not Boxes 15-17 – These apply only to businesses participating in the Combined Federal/State Filing Program, which are not required to complete these boxes For IRS instructions for filing forms 1099-NEC and 1099-MISC, click here. 1099 Deadlines The deadline for filing 1099 forms of any kind is January 31, …
What Forms Are Eligible for the CF/SF Program?
The new form 1099-NEC is one of the forms not able to be filed through the CF/SF program. The Combined Federal and State Filing program “forwards original and corrected information returns filed electronically through the FIRE (Filing Information Returns Electronically) System to participating states free of charge for approved filers, eliminating separate reporting to the participating states,” per the IRS. Participating States Many, but not all, states participate in the CF/SF program. Some states don’t have a state income tax, and therefore would have no need to have federal income tax forms forwarded to the states. States that do not have a state income tax include Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Those states that participate in the CF/SF program include Iowa, Illinois, Kentucky, New York, Oregon, Pennsylvania, Rhode Island, Utah, Virginia, West Virginia, Vermont, District of Columbia. Those states that do not participate in the CF/SF program include Alabama, Arkansas, Arizona, California, Colorado, Connecticut, Delaware, Georgia, Hawaii, Idaho, Indiana, Kansas, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, Wisconsin. Eligible Forms If you are in a participating state, here are the forms that efile360 can help you with, most are eligible for the CF/SF program. Please note: 1099-MISC is on the list but, as of now, the new 1099-NEC form for reporting non-employee compensation is not among the eligible documents. Form 1099-B - Proceeds from Broker and Barter Exchange Transactions Form 1099-DIV - Dividends and Distributions Form 1099-G - Certain Government Payments Form 1099-INT - Interest Income Form 1099-K - Payment Card and Third Party Network Transactions Form 1099-MISC - Miscellaneous Income Form 1099-OID - Original Issue Discount Form …
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2021 Drafts for 1099-NEC and 1099-MISC
Over 1,000 drafts for 2021 tax forms are now available through the IRS website. The 1099-NEC and 1099-MISC drafts for tax year 2021 have been released. Both forms are for reporting non-employee compensation, but recent updates have spelled change in the process for reporting. For more information about filing the 1099-NEC, check out this article. Form 1099-NEC Changes for 2021 Though this form was renewed for the 2020 tax year, there won’t be many changes for the 1099-NEC in tax year 2021. Most of the changes were to the form’s design and to revise dates for the next year. It is worth mentioning, this addition to Instructions for Recipient Box 1: “Note: If you are receiving payments on which no income, social security, and Medicare taxes are withheld, you should make estimated tax payments. See Form 1040-ES (or Form 1040-ES-NR). Individuals must report these amounts as explained in these box 1 instructions. Corporations, fiduciaries, and partnerships must report these amounts on the proper line of their tax returns.” Form 1099-MISC Changes for 2021 The 1099-MISC form for 2021 has not been changed in terms of design or appearance, with the exception of dates being updated to reflect the tax year 2020. The instructions for 2021, however, have removed the following note under the “Amounts shown may be subject to self-employment (SE) tax”: “Note: If you are still receiving payments on which no income, social security, and Medicare taxes are withheld, you should make estimated tax payments. See Form 1040-ES (or Form 1040-ES-NR). Individuals must report these amounts as explained in the box 14 instructions on this page. Corporations, fiduciaries, or partnerships must report the amounts on the proper line of their tax returns.” Another change to the Instructions for Recipient section is the removal of all mentions of the form 1040-SR, and other sections are mow omitting mention of form 1040-NR as well. Further changes to Box 5 instructions were made. Rather …
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Changes for Tax Year 2020
Unemployment, the CARES Act, and more – the tax year 2020 has been interesting. The effects of the COVID-19 pandemic will be felt long-term in many arenas. The tax arena is no different. At the federal and state levels, tax year 2020 looks quite different than previous years. Tax Year 2020: COVID Layoffs In March 2020, millions of Americans were furloughed, laid off, and otherwise out of work due to shutdowns and other pandemic precautions, forcing them to file for unemployment. That, coupled with the stimulus checks that in some cases are still being sent out, means reporting income and expenses for tax year 2020 will look very different for employees. However, employers won’t have it easy, either. In 26 states and the District of Columbia, executive orders have been put into effect that state COVID-19-related layoffs “will not be charged against employers for purposes of calculating the experience ratings that determine their UI [unemployment insurance] tax rates,” according to the Tax Foundation. This is being done to help protect businesses from the unprecedented effects of the pandemic and area- or industry-specific shutdowns. States pay unemployment benefits from UI trust funds, which is where employers’ UI taxes go. Typically, if an employer has an unusually high rate of layoffs within their company, this employer will be hit with higher UI taxes than those businesses who have a history of low layoff rates. For tax year 2020, more than half of U.S. states are waiving this penalty, thus preventing employers who experienced high layoff rates due to COVID from being charged for these “extra” unemployment claims. Keep in mind, many states have not yet decided on a course of action, and six states – Arkansas, Maryland, Mississippi, Nevada, South Dakota, and Washington – have stated that employers will still be charged regularly for this year, regardless of the nature of the layoffs. For more in-depth information about this topic, click …
Freelance Boom: What Your Business Should Know About Freelance Work and Taxes
36% of freelancers do so full time – this is an 8% increase from 2019. How does hiring more freelancers affect your taxes? The freelancing industry in the U.S. is now a $1.2 trillion economy. This was a rising trend before the coronavirus pandemic hit, but now that it’s here and sticking around for a while, the push towards freelance and remote work has accelerated even more. Do you work with freelancers currently? Are you considering working with freelancers at an increased rate or for the first time this year? If the answer is yes, your tax filing process will likely be changing this year. Freelancers, when filing their own taxes, are often taught to think of themselves as their own business. But what does that mean for your business’s taxes when you hire them? The addition of the form 1099-NEC has changed the way businesses that hire freelancers and independent contractors will report those payments in the tax year 2020. Let’s go through some common changes and misunderstandings. What is a Freelancer or Independent Contractor? Your employees, freelancers, independent contractors – they all work for you, so why aren’t they all treated the same from a tax filing perspective? The big difference is in the relationship to your business. Employees (whether full- or part-time) have their income taxes withheld or matched by their employer: independent contractors and freelancers, since they are considered a separate entity, must set that money aside themselves. The hiring company or business does not do that for them. Freelancers also often set their own hours, use tools they purchased or acquired themselves, complete their work in whatever way they prefer, and they can also refuse work. Full employees are not able to do these things without approval from your business managers or supervisors. Do you need help filing as a freelancer or independent contractor? Check out this blog post instead. What Tax Forms Are Needed? At the end of the year, …