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 …
Continue Reading about What Forms Are Eligible for the CF/SF Program? →
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 …
Continue Reading about IRS Publication 1220 and How It Affects Your 1099 Filing →
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 1098s and When to Use Them
There are close to 1,000 forms related to federal income taxes, and seven different types of 1098 forms. There are seven different types of 1098 forms, each with a different purpose and importance. Let’s run through each form and what they’re used for. 1098 This form is a Mortgage Interest Statement. Your mortgage company will send you this form if you paid at least $600 in mortgage interest. 1098-C This form is for Contributions of Motor Vehicles, Boats, and Airplanes. If you donated a car, boat, or airplane worth more than $500 to a charity, you can take a charitable deduction for your contribution using this form. 1098-E This form is a Student Loan Interest Statement. Your lenders must give you this form if you paid at least $600 in qualified loan interest. 1098-F This form is for Fines, Penalties, and Other Amounts. If you paid any of the following, you’ll need to include them on this 1098 form: court-ordered fines, penalties, restitution, or remediation. However, these payments are not typically tax-deductible. 1098-MA This form is for Mortgage Assistance Payments. You’ll use this form when you received or paid any homeowner assistance payments through a state Housing Finance Agency. If you meet certain requirements, you could potentially deduct those payments. 1098-Q This form is for Qualifying Longevity Annuity Contract Information. This contract is from a certain type of retirement account, and the 1098-Q is where you’d report these payouts. 1098-T This form is a tuition statement. The recipient may claim education credits if he or she paid tuition to an eligible higher education institution, like a college or university. 1098 forms are given to anyone who has been engaged in any of the abovementioned financial transactions during the tax year. When you receive these forms, it’s always a good practice to make sure all information reported – even VINs, social security numbers, etc, - is correct before you file your …
Continue Reading about Types of 1098s and When to Use Them →
Filing 1099-NEC: Dos and Don’ts
The IRS has re-introduced the 1099-NEC form for reporting non-employee compensation in an effort to smooth out the reporting process for contract labor and other related costs. Here are some of the main dos and don’ts of filing 1099-NEC. Do: File 1099-NEC Forms for Non-Employee Compensation The IRS requires reporting payments that are: made to someone who is not your employee, made for services in the course of trade or business dealings, or payments over $600 for the calendar made to an individual, partnership, estate, or even sometimes a corporation. Some examples of this include professional service fees to attorneys, accountants, or architects, fees paid between two professionals, payments for services, even parts and materials, and commissions. Don’t: Report Exceptions These exceptions do not need to be reported: payments for phone, freight, telegrams, storage, or merchandise and the like and payments for a foreign government, tax-exempt organizations, tax-exempt trusts, and payments to governments at the federal, state, and local levels. Do: Verify Recipient Taxpayer ID One of the first things you need to do is verify each recipient’s taxpayer ID. In order to complete the 1099-NEC for your contract workers, you must also have a form W-9 given to you by each recipient. Don’t: Use Form 1099-NEC for Personal Payments A big thing to remember about the new 1099-NEC form reporting is: don’t use the form 1099-NEC to report personal payments. Do: Mind Your Due Dates When filing and submitting these forms, remember the due date to distribute 1099-NECs to recipients is January 31 – though this date falls on a Sunday for 2021, so February 1 will be the deadline for the year. You must also be sure to file with the IRS by January 31 (again, February 1 for the year 2021). Don’t: Use Form 1099-NEC for Employee Wages In the same way that personal payments aren’t reported on the 1099-NEC, this form is also not for reporting employee wages. Make sure not to …