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Where e-filing information return forms comes full circle. We support 1099, 1098, W-2, and Affordable Care Act forms.

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Do You Need a Form 1099-NEC or Form 1099-K?

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With the return of Form 1099-NEC, the question of whether to use Form 1099-MISC or Form 1099-K now largely changes to whether you should use Form 1099-NEC or Form 1099-K.  What is Form 1099-NEC? Form 1099-NEC is the form you use to report nonemployee compensation. You send this form to the IRS, the state, if applicable, and the contractor or other nonemployee.  Learn more about Form 1099-NEC here. What is Form 1099-K? If you receive payments via a payment card or third-party network, then you will receive a Form 1099-K from the financial institution.  According to the IRS: You should receive Form 1099-K by January 31st if, in the prior calendar year, you received payments: from payment card transactions (e.g., debit, credit or stored-value cards), and/or in settlement of third-party payment network transactions above the minimum reporting thresholds of – gross payments that exceed $20,000, AND more than 200 such transactions Tip: This does not include ACH transactions using third-party payment processes, such as PayPal or Stripe, because they act like a credit or debit card with added security. However, services like Venmo and Cash App do require that you report payments via a 1099-NEC or 1099-MISC if those payments meet the requirements. Is Form 1099-K Relevant for Nonemployees? If you pay your nonemployees via third-party payment avenues, then you may not need to send them Form 1099-NEC if the situation meets the criteria. If a contractor receives $20,000+ in payments from your business across 200+ transactions, the financial institution you go through will send them a Form 1099-K. In this case, you would not send them a Form 1099-NEC. However, most contractors are paid by the job or at least weekly, which totals to about 52 payments per year, meaning nonemployees will rarely meet this threshold and you will need to file Form 1099-NEC for each contractor. Tip: If you don’t provide the third-party payment …

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Form 1099-NEC Best Practices for CPAs

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As a CPA, if you’re preparing Form 1099-NEC for your clients, then you need to know the latest best practices. Start preparing for tax year 2020 now with these tips. Review How Your Clients’ Income is Mapped With the return of Form 1099-NEC, you will need to pay close attention to how you map your clients’ income. You will need to adjust how you map their income and adjust your routine from previous years to split non-employee compensation and other miscellaneous payments.  Ideally, you will map out whether your current process for Form 1099-MISC is accurate, adjust it accordingly, and then split off the necessary variables for Form 1099-NEC. Accurately mapping your clients’ income ensures that you report the correct amounts on the right forms at the right time. Specific situations that you may want to pay close attention to include: Lawyer payments Other income Real estate payments, such as rent Be Aware of Penalty Increases Among the many changes that the return of Form 1099-NEC brings, the penalties are changing, too. In general, they continue to increase for late or inaccurate reporting. Find out more about 1099 penalties here. According to Moss Adams, “For 2019 filings, penalties are applied at $50 for information return reports filed after the deadline but within 30 days, and they increase to $110 for returns filed after 30 days beyond the deadline but before August 1, 2020. Information return reports filed incorrectly after August 1, 2020, or not at all, will have a penalty of $270 per form.” Encourage Payment and Withholding Tracking Whether you’re meeting with clients before tax year 2020 or not, it’s important to inform them that they need to separately track nonemployee compensation and other 1099 payments. The sooner you tell your clients this and show them how to do so, the easier the next tax season will be for you and your clients. Equally as important is to note the difference for state income and withholding as it …

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Examples of When to Use Form 1099-NEC

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Form 1099-NEC doesn’t have to be confusing. Here are practical examples of using Form 1099-NEC.  If you need to catch up on what Form 1099-NEC is and how it changes Form 1099-MISC, read these first: What’s the New 1099-NEC for Non-Employee Compensation? How has Form 1099-MISC Changed with the Return of Form 1099-NEC? Form 1099-NEC: What Does It Mean For Your Business? When to Use Form 1099-NEC When You Pay Fees for Professional Services  When you pay for professional services, you will likely report this on Form 1099-NEC. This includes fees paid to attorneys – even when the law firm or individual is a corporation – as well as fees paid to accountants, architects, engineers, and consultants.  According to Sovos, you may create two 1099 forms for the same attorney for different legal services. These forms will likely have different numbers on them. When you work with an attorney for a specific litigation, you will report your payments on Form 1099-MISC in Box 10 Gross Proceeds Paid to an Attorney. If you use the same law firm for general purposes – including contract reviews and potential legal issues concerning your employees  – you will report your payments on Form 1099-NEC.  Incidentals  When you pay for other services and part of the payment covered incidentals – the cost of parts or materials used to perform the services – you will complete Form 1099-NEC. When You Pay Commission If you have salespeople, you likely pay them a commission. If they do not repay this commission during the year, you will report the total payment on Form 1099-NEC.  If You Sold $5,000 or More in Consumer Products According to the IRS, if your made direct “sales of $5,000 or more of consumer products to a person on a buy-sell, deposit-commission, or other commission basis for resale (by the buyer or any other person) anywhere other than in a permanent retail establishment,” you will enter an “X” in Box 7 of Form 1099-MISC. With this form, you may also need …

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Everything You Need to Know About Filing 1099 Forms

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As a business owner, bookkeeper, or accountant, you may need to file 1099 forms. What is a 1099 Form? Form 1099 is one type of IRS tax form used to report non-salary income for federal tax purposes. There are more than 20 variations of Form 1099, but the most common are 1099-MISC and 1099-NEC. Non-salary income includes: Money from tax dividends Prize winnings Gambling and lottery winnings  Interest income IRA distributions and withdrawals  Personal property sales State tax refunds Credit card debt forgiveness Who Fills Out a 1099 Form? As a business owner, bookkeeper, or accountant, you are the one who fills out 1099 forms for every non-employee you pay more than $600 in a calendar year. Who Receives a 1099 Form? Non-employees receive 1099 forms. This is usually independent contractors or freelancers, but can also be partnerships.  Every 1099 form has five copies: Copy A is meant for the IRS Copy 1 is meant for the state tax department, if applicable Copy B is for the recipient (non-employee); they do not send this form to the IRS, but they do report the income on their personal tax return Copy 2 is meant for the recipient (non-employee) to submit to their state tax department, if applicable Copy C is for your records Who Doesn’t Receive a 1099? If you pay a non-employee less than $600 in a calendar year, then you do not need to file a 1099. If a non-employee, such as an independent contractor, is registered as a C or S corporation, you do not need to file a 1099.  If you have employees, you will not file 1099s. Instead, you will file W-2s.  What Information Does a 1099 Form Require? When you go to fill out a 1099 form for each non-employee you paid at least $600 last year, you need the following information: Their legal name Their address Their taxpayer identification number (TIN) The total amount you paid them last year How Do You Get This Information? To acquire this information for each non-employee, you need to …

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How to File ACA Forms to the IRS

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Similar to other tax forms, you can file Affordable Care Act forms by paper or electronically.  What are ACA Forms? Affordable Care Act (ACA) forms, also known as ObamaCare forms, report healthcare plan coverage information to the IRS and employees. Employers with 50 or more full-time employees, all self-insured employers, and some insurance companies must file this form. How to File ACA Forms If you have less than 250 ACA forms to file, you can submit paper copies. If you have more than 250 ACA forms, then you need to file electronically using the Affordable Care Act Information Returns (AIR) system.  ACA Forms Due Dates You must deliver 1095 forms to your employees by January 31.  If you are filing by paper, you must do so by February 28. If you are e-filing, you must do so by March 31.  E-filing Benefits Choosing to e-file your ACA forms, even if you have less than 250 ACA forms to file, has many benefits: You have an additional month to file compared to paper filing. You can correct errors by using TIN Checking before you file. Receive an immediate e-filing submission status; it will be “accepted,” “accepted with errors,” or “rejected.”  Receive a dated Receipt ID that verifies your submission, which is beneficial if your business receives an IRS Letter 5699, which identifies potential non-filers of the required ACA Information Returns. Troubleshooting E-filing Issues In order to e-file using the AIR system, you must first apply for a Transmitter Control Code (TCC). The application requires your business’s details, including your EIN, as well as the details of two business officials, at minimum, who will be transmitting the information. The application also requires what type of transmission methods you will use.  After the application is submitted and it’s accepted by the IRS, the business needs to go through an ACA Assurance Testing System. This test determines whether your business’s technology will ensure that all e-filing will take place …

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I Can’t Pay My Business Taxes On Time. What Do I Do?

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Don’t panic. You have options.  What To Do When You Realize You Can’t Pay Your Business Taxes First, don’t panic. This happens to many business owners. Second, be sure to file on time, even if you can’t afford to pay in full at that time.  Next, review your options. Understand that no matter how you proceed, your debt will accrue interest until you pay the IRS in full. And the IRS will not waive interest charges. Double-check your books to see if you can pay the IRS in full before moving forward with payment options. Then, be sure to respond to the IRS’s notice within 30 days of receiving it. This means collecting all of your business’s financial information, including pay stubs, rental or lease agreements, mortgage statements, lease and loan documents, and utilities documents. Call the IRS at 800-829-4933 for assistance. The IRS can help you determine the best payment option for you based on your current circumstances. You Have 4 Options if You Can’t Pay Your Business Taxes On Time Full Payment Agreement Installment Agreement  Offer in Compromise or Partial Payment Installment Agreement Temporarily Delay Collection  A Full Payment Agreement provides you with additional time to pay your business taxes in full. The timeframe is up to 120 days.  An Installment Agreement is a monthly payment plan. You can discuss your needs with the IRS about payment options and set up a payment plan with them. A monthly payment plan may work well with your monthly budget if you cannot pay in full within 120 days.  An Offer in Compromise is when you and the IRS create an agreement that determines a reduced payment amount to resolve your tax liability. You are essentially compromising on the debt amount. The IRS will only consider an Offer in Compromise if you are up-to-date on all tax filing and all other tax payments, including quarterly taxes.  A Partial Payment Installment Agreement lies somewhere between an Installment Agreement and an …

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