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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IRS Publication 1220 and How It Affects Your 1099 Filing
The IRS released Publication 1220, which says the 1099-NEC will not be included in the IRS 1099 Combined Federal/State Filing Program. Publication 1220 from the IRS is a recent and detailed announcement about the “Specifications for Electronic Filing of Forms 1097, 1098, 1099, 3921. 3922, 5498, and W-2G”. While you may not wish to read the full, 162-page PDF, some important new information has been shared about how to file the new form 1099-NEC. Publication 1220 “helps employers and tax professionals understand the specifications for filing certain information forms electronically with the IRS, including the requirements under the Combined Federal/State Filing Program (CF/SF),” as reported in this Forbes article. Federal and State Filing of 1099-NEC For 2020, the CF/SF Program has a list of which 1099 and other forms can be filed electronically. A key part of this program is the ability for these federal returns to be forwarded automatically to participating states, simplifying and streamlining the federal and state filing process. According to Publication 1220, however, the 1099-NEC is not among the approved forms. This means it’s on the individual business to make sure these forms are submitted to the state by the January 31 (or in 2021’s case, February 1) deadline. Past Payments Still Need to be Filed Under Form 1099-MISC In the past, those who filed the 1099-MISC were able to take advantage of the CF/SF Program. With that in mind, any non-employee compensation you report that took place prior to the tax year 2020 – say, if you forgot to report a 2019 payment or compensation – will need to still be reported on a 1099-MISC, which is a part of the CF/SF Program. 1099-NEC Filing Extension Another new change for the tax year 2020 is the process for requesting a filing extension on these forms. Publication 1220 says “a request for an extension of time to file can be submitted on paper form 8809.” Filing this paper form is simply a request for a …
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Exceptions to the 1099-NEC
There are 11 exceptions listed by the IRS that are not to be filed using 1099-NEC. The renewed 1099-NEC and accompanying 1099-MISC form changes may make your 2020 tax year filing a bit different than past years. We’ve discussed the dos and don’ts of filing the 1099-NEC as well as federal and state filing, and now let’s talk about some of the exceptions to the 1099-NEC, according to the IRS. Some payments, payouts, and compensation will not be reported on the 1099-NEC. Payment Exceptions to 1099-NEC Though many payments like contract work, fees paid to attorneys, and other payments and merchandise transactions between two professionals are recorded on the 1099-NEC, there are quite a few exceptions. Payment exceptions include: Payments for merchandise, telegrams, telephone, freight, storage and similar items Rent payments to property managers and/or real estate agents. Note: these rent payments must, however, be reported on the 1099-MISC by the agent or manager. Payments to a tax-exempt organization, which also includes tax-exempt trusts: IRAs, HSAs, Archer MSAs, Coverdell ESAs, and ABLE (529A) accounts. Any payments made to or for homeowners from the HFA Hardest Hit Fund or similar state programs. Compensation Exceptions to 1099-NEC 1099-NEC exceptions also include some forms of compensation. Per the IRS, there are 1099-NEC exceptions for “compensation for injuries or sickness by the Department of Justice as a public safety officer disability or survivor's benefit, or under a state program that provides benefits for surviving dependents of a public safety officer who has died as the direct and proximate result of a personal injury sustained in the line of duty.” Compensation for wrongful incarceration (regardless of criminal offense) which ended in a conviction under federal or state law are also exempt from form 1099-NEC filing. Wage Exceptions to 1099-NEC Wages paid to employees are another exception to form 1099-NEC, …
Types of 1099s and When to Use Them
The most common 1099 forms are 1099-MISC, 1099-INT, 1099-DIV, 1099-K, 1099-B, 1099-G, and 1099-R. There are more than a dozen different types of 1099 forms, each with a different purpose and importance. Let’s run through each 1099 form and what they’re used for. 1099-A This form is for Acquisition or Abandonment of Secured Property. This is typically used when property has been transferred due to foreclosure. 1099-B This form is for Proceeds from Broker and Barter Exchange Transactions. It is used by brokerages and barter exchanges to record customer gains and losses in a tax year – stocks, commodities, regulated futures contracts, foreign currency contracts, forward contracts, debt instruments, options, securities futures contracts, etc. 1099-C This form is for Cancellation of Debts. Lenders and creditors file this form if a debt of $600 or more has been canceled. 1099-CAP This form is for Changes in Corporate Control and Capital Structure. This form is used to report shareholders who have received cash, stock, or other property through an acquisition or other significant change in structure of capital. 1099-DIV This form is for Dividends and Distributions. You must file this form if you own stock or securities and receive more than $10 in distributions like dividends, capital gain distributions, or nontaxable distributions paid on stock and liquidation distributions. 1099-G This form is for Certain Government Payments. Use this form to report unemployment compensation, state and local income tax refunds, agricultural payments, and grants that are taxable. 1099-H This form is for Health Coverage Tax Credit (HCTC) Advance Payments. This form is used to report advance payments of qualified health insurance payments for the benefit of eligible trade adjustment assistance (TAA), alternative TAA, re-employment TAA, or Pension Benefit Guaranty Corporation (PBGC) payees and their qualifying family members. 1099-INT This form is for Interest Income. …
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