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

1099-NEC

The Versatility of 1099-NEC Deductions

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There are several ways to take advantage of 1099-NEC deductions, and they’re not all related to independent contractor work. Let’s discuss the various deductions that can be recorded on Form 1099-NEC. The Main Deduction: Non-Employee Compensation 1099-NEC was recently reinstated in the tax code and process to differentiate non-employee compensation more clearly. If our business paid an independent contractor or freelancer more than $600 during the tax year, you have to give the correct W-9 information to those non-employees so they can use them for their 1099-NEC deductions and reporting. If you are an independent contractor or business that was paid for the work and you are using the 1099-NEC to report your earnings to the IRS, you may also be eligible for the qualified business income deduction. This deduction allows you to take a 20% deduction on pass-through income. Breaking Down Non-Employee Examples Often, when we mention freelancers or independent contractors, a few specific businesses or individuals come to mind: freelance photographers, writers, marketers, and the like, or contractors that include those in the construction or consulting fields. While all of these roles can describe the people you paid for labor who weren’t direct employees of your business, that’s just the tip of the iceberg for 1099-NEC deductions and business relationships. Types of Businesses, Products, and Services Eligible as Non-Employee Compensation Non-employee compensation is used for tax purposes to classify any wages or payments made to those who did work for you or your business – either for a specified temporary basis or for a defined project. Non-employees are typically independent contractors, freelancers, sole proprietors, and self-employed individuals. These can be creative or marketing consultants or freelancers. Some examples of this include things like: Paying a copywriter or editor for their work on monthly blog articles posted to your website …

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1099-MISC, 1099-NEC, 1099-K: What’s the Difference?

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The introduction of the 1099-NEC in 2020 has many businesses still stumped about which to file: 1099-MISC, 1099-NEC, or 1099-K. Let’s break them down here quickly. Because there are more than 40 different information returns that businesses and individuals are filing any given year, it’s easy to get lost in them. Each one has been described in detail by the IRS, but that doesn’t mean there won’t be specific cases where you are unsure if someone who did work for you is considered an independent contractor or not, or whether your last Venmo payment to a contractor puts you over the threshold that then requires an information return be filed. Rest assured, eFile360 is here to help. 1099-MISC The Form 1099-MISC is the one you’ll use to report miscellaneous payments you’ve made throughout the year. These miscellaneous payments include, according to the IRS, any of the following that totaled at least $600: Rents Prizes and award Other income payments that don’t include non-employee payments (those are filed on the 1099-NEC, see below) Medical and healthcare payments Proceeds from crop insurance Cash payments for fish and other aquatic life purchased from anyone in the trade or business of catching fish Cash paid from notional principal contract to an individual, partnership, or estate Payments to an attorney Fishing boat proceeds The term “miscellaneous” accurately describes the different payment types and descriptions captured here, and previously was used to report the non-employee payments made to independent contractors, but that is now reported on the newly reinstated 1099-NEC. Because the 1099-MISC is responsible for reporting so many different things, it’s important to know when and if your payments fall in these categories, as there are penalties for incorrect filings. 1099-K 2022 has been a hot year for 1099-K changes. Many tax, business, and payment industry gurus are weighing in on the latest changes and how they …

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4 Most Common Tax Season FAQs

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Even though we have taxes due every year, we always have some questions. The tax code changes frequently, and it’s extremely complex. Here are some of the most common tax and tax season FAQs. How Can I Lower My Tax Bill? Far and away, the biggest tax questions are always some variants of “How can I lower my taxes?” and “What deductions am I eligible for?” Tax deductions and credits are the most common way to reduce your tax obligation, whether you are doing your individual or business taxes. The hard part about this question is that it’s different for everyone. A lot of your tax information comes in the form of Information Returns, the forms like 1099s, 1098s, W-2s, and others that show you what your financial activity looked like throughout the tax year. These Information Returns help you fill out the tax forms you need in order to take advantage of many of these deductions and tax credits. eFile360’s top-tier e-filing services offer you a great solution for filling out and storing these forms. What Are This Year’s Tax Changes? Every year, the IRS makes adjustments to the tax laws, processes, and procedures based on the latest government regulations, technology changes, and overall performance during the last tax season. This tax question is one that people are worried about all the time. American taxes are like a high-level puzzle: you have to put all the pieces together, solve the equations, and hopefully submit the right answers. But if the rules have changed, you may be making inadvertent mistakes. The IRS website, specifically their Newsroom, is a great way to stay up-to-date on any and all changes that are coming up during the next tax season. What’s the Difference: W-2 vs. 1099-NEC? The 1099-NEC is one of the newest Information Return forms to be (re)instated. These forms are used to calculate non-employee compensation, including freelancer and independent contractor work. W-2s are given to employees of a business early on during tax …

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Publication 1220 for Tax Year 2021

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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 …

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2022 Tax Deadlines to Mark on Your Calendar

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The 2022 tax season is just around the corner. To help you get ready, we wanted to put together a list of the most important 2022 tax deadlines that affect you and your business. 2021 Remaining Deadlines As we look toward 2022, there are still a few deadlines and windows in the remainder of 2021. The Open Enrollment window for Marketplace Insurance tied to the Affordable Care Act runs from November 1, 2021, to January 15, 2022. If you want your insurance to take effect immediately on January 1st, you need to select your plan by December 15, 2021. Another deadline yet not past in 2021 is the deadline to maximize 401k contributions. You can still make contributions up to and including December 31, 2021. IRS Publication 509 In the draft IRS Publication 509, the Internal Revenue Service outlines some of the newest changes and reminders for the 2022 tax season. Some of those reminders include: Payment of Deferred Employer or Employee Share of Social Security Tax of 2020: If you are an employer or employee who deferred paying their share of social security or railroad retirement tax equivalent in 2020, 50% of the share is to be made by January 3, 2022, and then applied against the payment due on January 3, 2023. Useful Publications: lists are included to help you navigate the previous IRS publications that pertain to employers, farmers, individuals, and those required to pay excise taxes. W-2s and 1099-NEC There are currently no changes to the process or form make-up as it pertains to the 1099-NEC that reports non-employee compensation. The deadline for these to be sent out is January 31, 2022. Tax Year Deadlines For employers, the due date for December 2021’s social security, Medicare, and withheld income tax is January 18, 2022, if the monthly deposit rule applies. The subsequent monthly deadlines fall on the following dates in 2022: February 15, March 15, April 18, May 16, June 15, July 15, August 15, September 15, October 17, November 15, …

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Growth of the Gig Economy

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The growth of the gig economy is a big change-maker for lots of businesses across all industries. Why is Gig Work Growing? The gig economy is taking off for several reasons. Brodmin has an insightful case study about gig work. Though COVID-19 spurred a big wave of workers into the gig economy, favor with the freelance and independent contractor style of work has been growing for a number of years. The pros: flexible schedule, the ability to control your workload, extra income outside your traditional. All of these things align with the work-life balance and benefits that Millennials and Gen Z are looking for in their “dream job” scenarios. Some industries are growing their gig worker base because of new trends. Things like Uber and Airbnb have seen record growth recently, and that trajectory will continue in the coming years. Technology is Leading the Way Other growth areas in the gig economy are being led by technology. Web and graphic design, programming, and IT are at the top of the list of fields experiencing prominent growth in the number of freelancers and independent contractors making up the workforce. Also, with the rise in company use of collaboration tools and other remote-friendly technology, gig work has become more accessible. Computer work can be done from anywhere, and more people are taking advantage of that. What Gig Work Means for Your Taxes Gig economy growth means that your business will be more likely to interface with freelancers and independent contractors on a regular basis. Because gig workers aren’t classified as employees, the taxes associated with your business also differ. According to JustWorks.com, more than 3 million employees are misclassified as 1099 contractors every year. You can only classify the people you hire as gig workers if: They control when and how they do their work They use their own supplies and equipment to carry out the job They get paid directly by varying clients If the person …

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