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What to Do If Your 1099s Have Errors

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Changes to Form 1099-MISC and 1099-NEC in the tax year 2020 mean you should be extra vigilant in your filing of these forms to prevent errors. But what happens if your 1099s have errors? Let’s talk about it. Wrong Form One of the first major errors you can encounter is the use of the wrong form. With the updates regarding 1099-MISC and 1099-NEC, it’s very easy to flip-flop these forms and fill them out incorrectly. The Balance Small Business uses the example that you have to use the 1099-NEC for attorney fee payments, but you’ll report gross proceeds to attorneys from lawsuits using the 1099-MISC.   If you use the wrong form, be sure to double-check the instructions and let your tax service know, or – if you are doing the filing yourself – prepare and file the red Copy A with the IRS. Filling in the Wrong Box Sometimes, it’s not the form that is wrong, it’s the box you used incorrectly. Some examples include rent, which is found on box 1 and which will be shown on a 1040 Schedule E, or “other income” (which in and of itself is tricky to understand) which can be found on a 1040 Schedule C or other 1040 form. The IRS treats different income types very differently, depending on what boxes you choose to use. For 1099-MISC and 1099-NEC, be sure you have thoroughly read the instructions from the IRS before you begin inputting your information on the final forms. Name and TIN Errors If you made a mistake regarding your name, taxpayer identification number (TIN), or both, you will not need to file a corrected 1099. Instead, you will need to write a letter to the IRS with the following information included:  Name and address Type of error, Tax year TIN Transmitter Control Code Type of return Number of payees Filing method Whether federal income tax was held The letter must be mailed to: Internal Revenue Service Information Returns Branch 230 Murall Drive, Mail Stop 4360 Kearneysville, WV 25430 Filing Corrected 1099s If …

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What is Form W-9 and How Does It Help Me With Form 1099?

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As a business owner or accountant, you understand how important TIN checking is, but how do you get TINs in the first place?  What is Form W-9? To request a TIN from an employee, freelancer, or contractor, you can use Form W-9.  According to the IRS: Use Form W-9 to provide your correct Taxpayer Identification Number (TIN) to the person who is required to file an information return with the IRS to report, for example: Income paid to you.  Real estate transactions.  Mortgage interest you paid.  Acquisition or abandonment of secured property.  Cancellation of debt. Contributions you made to an IRA. Why is Form W-9 Important? If you pay full-time employees, you likely have procedures established where you collect their personal information, including their TIN. But what about your freelancers and contractors?  It’s important to have a procedure for collecting their TINs, too. Form W-9 makes this easier. Mark J. Kohler explains the importance of Form W-9 well: The W-9 is your “best friend.” Some of you may be frustrated that you don’t have the information you NEED to issue Form 1099. One of the smartest procedures a business owner can implement is to request a W-9 from any vendor you expect to pay more than $600 before you pay them. Using this as a normal business practice will give you the vendor’s mailing information, Tax ID number, and also require them to indicate if they are a corporation or not (saving you the headache of sending them a 1099 next year).  Having a contractor’s W-9 on file before tax season will make filing 1099s much easier. What to Do if You Receive a W-9 If you receive a W-9 from a company or person, it’s important that you complete the form accurately and return it to the company that sent it to you. That company or individual will likely keep that form on file to reference during their end-of-the-year accounting, so be prepared to receive a Form 1099-NEC or similar form from them next …

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Is TIN Checking Necessary?

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Many e-filing services provide TIN checking as an additional service to e-filing and paper filing. But what is the service? And is it necessary?  Many of our customers ask these questions when they use eFile360 to file their 1099s and related forms for the first time. Most customers want to be informed before they complete their order while others are suspicious of add-ons in general. So we wanted to clear the air: TIN checking isn’t necessary to file your 1099s, but this service can save you a lot of headaches.  What is a TIN? A TIN is a Taxpayer Identification Number. It is also called a “95-number” or “tax-ID” number. A TIN is an umbrella term that means the following: Social Security Number (SSN) Employer Identification Number (EIN) Individual Taxpayer Identification Number (ITIN) Adoption Taxpayer Identification Number (ATIN) Preparer Tax Identification Number (PTIN) Business owners typically use their EIN to file business taxes and their SSN to file their personal taxes, but this may differ based on your unique situation. When it comes to filing 1099s, 1098s, ACA forms, and W-2s, business owners need to know the TIN for each employee, freelancer, and independent contractor that works for them.  Tip: While you may only need to file a form if you pay that employee or contractor $600 within a calendar year, it’s always best to document their TIN before they start working for you. This way, you know that you have their TIN on file way before tax season. What is the TIN Error Reconciliation Process? When it comes to tax reporting, it’s vital that all of the information you file is accurate – including the TINs of your employees and contractors.  This is where the TIN error reconciliation process comes into play. This process is three-fold: Check your records Use a TIN checking service, which efile360 offers File Form 1095-C when you find TIN errors  The first portion of this process involves you double-checking …

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2021 Deadline for Forms 1099-MISC and 1099-NEC

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Tax season is around the corner, so it’s time to start gathering information and preparing for the deadlines. What is the 2021 deadline for filing 1099s? The 2021 deadline for Forms 1099-MISC and 1099-NEC is Monday, February 1 since the typical deadline date, January 31, lands on a Sunday. The deadline for Form W-2 is also February 1, 2021. According to CPA Practice Advisor: A 2015 law made it a permanent requirement that employers file copies of their Form W-2, Wage and Tax Statements, and Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration by Jan. 31. That is also the date the Forms W-2 are due to workers. This includes Form 1099-NEC and 1099-MISC as it relates to independent contractors and related nonemployees. However, now that nonemployee compensation has been separated from Form 1099-MISC onto Form 1099-NEC, the deadline to e-file Form 1099-MISC is March 31, 2021. What does this mean for your business? Business owners need to file 1099s to the IRS and send pay statements to freelancers, contractors, and other miscellaneous earners by the deadline. This means you will want to start gathering the following information for the independent contractors who have worked for you in 2020: Full name Address Social Security Number or Individual Taxpayer Identification Number Learn more about the latest instructions for Forms 1099-MISC and 1099-NEC from the IRS here. Start your e-filing process with eFile360 E-filing is the quickest and safest way to submit forms, so e-file with eFile360. Create a free account today.  Be sure to utilize our TIN Checking service, which helps you know if you are reporting accurate tax IDs and names. Learn more about our TIN Checking service here. …

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How to Fill Out Form 1099

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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, …

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1099-MISC and 1099-NEC Mistakes and How to Avoid Them

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With the introductions of the 1099-NEC for the 2020 tax year, there are many common 1099 filing mistakes, but they can be easily avoided with some research and planning. 1099-MISC and 1099-NEC Common Mistakes One of the common mistakes that we’ll see a lot next year is the confusion about which 1099 form to use, MISC vs. NEC. The MISC form is largely unchanged, but the non-employee compensation will now be reported on the NEC form instead. This includes all the payments made to independent contractors for services and products related to that service. Next to completing the wrong form, not verifying the TIN (taxpayer ID number) is another easy mistake to make. This will cause all IRS reporting to be off, often resulting in penalties that a business, its contractors, or both may have to deal with. Filing a paper return, while not inherently a mistake, may result in late fees and penalties if the number of forms filed exceeds the IRS limit of 250. This count is per form, so you can file 10 1099-MISC and 130 1099-K forms with no trouble, but if there are 265 1099-NECs, the NEC forms must be e-filed. If you find yourself making any of these mistakes, it might be good to figure out what the filing penalties are and how to correct the issues. If there are errors in your 1099 forms, click here to learn how to correct them. How to Avoid Them Many of these mistakes can be avoided by doing some research about the different forms and their due dates. Double-check all information you will be reporting, especially the TIN. Having a professional individual or service look over your 1099s can also be a cost-effective way to avoid common 1099 filing mistakes and ensure all your forms have been filled out and submitted correctly federally and by state. If you think e-filing these forms is confusing, eFile360 can help. For more information about electronic filing, sign up for a free eFile360 account. …

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