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Preparing for Tax Reporting Season: Changes Ahead

Ready, set … check your vendor tax IDs.

We’re well into the 4th quarter. It’s time to think about 1099 reporting. That means having correct tax IDs for your vendors. First, you need to be sure you have a tax ID for each vendor. Second, you will save trouble later if you take the time before you file 1099s to verify your vendor TINs through the IRS TIN Matching program. (It’s better to have done this at vendor onboarding!)

And as you get set for 1099 reporting, be aware. This time around (as you read here a year ago) you have a new form 1099 to file.

1099-NEC

To report non-employee compensation for 2020, you must file the newly revived form 1099-NEC (non-employee compensation). The change is an effort to sort out the confusion resulting from the shift in reporting deadlines enacted in the 2015 PATH Act. The Act required you to submit 1099-MISCs by January 31 if they included non-employee compensation reporting in box-7. “NEC” reporting now has its own form.

Never fear, our old friend 1099-MISC is also still required. Use the 1099-MISC to report royalties, rents, health care payments, etc., as before. Those are due to recipients by January 31st and to the IRS March 31st electronically (February 28th if on paper).

But payments-for-services goes on the 1099-NEC. The filing deadline for the 1099-NEC is January 31st, although that will fall on a Sunday in 2021, so you will have until February 1st.

No CF/SF, No Automatic Extensions

In an unfortunate wrinkle, the 1099-NEC is not included in the 1099s that are forwarded to states participating in the Combined Federal/State Filing (CF/SF) Program. So, you need to plan to send copies of the 1099-NEC to the states yourself.

Note too that there is no automatic 30-day extension to file 1099-NEC, as there was for 1099-MISC. You must request an extension of time to file on IRS Form 8809.

The complete IRS Instructions for Form 1099-MISC and Form 1099-NEC are here.

If you’d like to like a better way to gather and verify vendor tax IDs, InvoiceInfo can help. Contact us.

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