The IRS recently released Publication 1220 for the tax year 2021. Here’s what you need to know. What is Publication 1220? IRS Publication 1220 is a document released yearly that lays out the specifications for the electronic filing of the following forms (you can see the full list on page 9 of the publication itself): 1097 1098 1099 3921 3922 5498 W-2G If your business – whether it be a corporation, partnership, employer, estate, and/or trust – is required to file 250 or more information returns in a calendar year, you must file electronically using the FIRE (Filing Information Returns Electronically) System by way of a TCC (Transmitter Control Code). While it’s not required, all businesses that have fewer than 250 are also encouraged to e-file their forms and keep that data safely stored so as to discourage fraudsters. Updates for Tax Year 2021 Since the original document is a 163-page PDF, we thought we would break down some of the biggest updates to Publication 1220 for the tax year 2021. First and foremost, let’s talk about Form 1099-NEC. When the IRS released Publication 1220 for the tax year 2020 in October of that year, the newly revamped 1099-NEC was not included in the IRS 1099 CF/SF (Combined Federal and State Filing) Program. But that changes this tax season, as the NEC is now eligible for e-filing. Before we get ahead of ourselves, let’s talk about the conditions of this change. There are still 36 states plus the District of Columbia (as of December 2021) that have their own direct reporting requirements for the 1099-NEC that cannot be met through CF/SF. And there are a number of states – Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas, Washington, and Wyoming – that do not participate in the CF/SF program at all but mandate direct reporting instead. It's also important to note that state-based electronic filing requirement updates must also be met, in addition to IRS guidance. Unfortunately, tax …
Do I Need to File 1099-NEC AND 1099-MISC?
We’ve talked a lot about the differences between Forms 1099-MISC and 1099-NEC. But are there instances where you’d need to file both? 1099-NEC and 1099-MISC The 2021 drafts for 1099-NEC and 1099-MISC have been out since late last year. The goal of reintroducing the 1099-NEC (last used in 1982) was to keep non-employee expenses separate from the 1099-MISC. As more and more businesses rely on independent contractors and freelancers, the 1099-NEC will become more widely used in the future. When to File Only 1099-NEC If you have payments totaling more than $600 to a non-employee, which includes any person or business hired as an independent contractor or freelancer, you’ll need to fill out the Form 1099-NEC. Here are a few other eFile360 blog resources that talk about how the 1099-NEC works: Filing 1099-NEC: Dos and Don’ts Examples of When to Use Form 1099-NEC When to File Only 1099-MISC Your business will need to file a 1099-MISC for every independent contractor you have paid more than $600 within the tax year for anything other than non-employee compensation. You’ll fill out the 1099-MISC after you request and receive that independent contractor’s W-9. Some main items reported on the 1099-MISC include: Rent Proceeds from a fishing boat Royalties Substitute payments made instead of paying interest or dividends Payments for medical and healthcare Crop insurance proceeds Gross proceeds paid to a lawyer Excess golden parachute payments For more resources to help with your 1099-MISC filing, check out these eFile360 blog articles: What You Need to Know about 1099-MISC Online Form Filing A Guide to Preparing 1099-MISC Forms When Do I Need to File Both? In some cases, you may be required to fill out both 1099-NEC and 1099-MISC. In these cases, you will have paid an independent contractor or freelancer more than $600 throughout the year either for services or parts and materials, while also paying: …
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