What You Need to Know About 1099 Compliance
As we approach year-end, now is a good time to review payments you’ve made during 2020 to determine if there are any that require a 1099 to be produced.
The timely filing of these 1099 forms is critical, so it would be beneficial to take the time now to verify that all of your vendor information has been entered accurately into your accounting system - this includes the vendor’s current mailing address and either their SS number or Employer ID number.
In addition, general ledger cost of goods sold and expense accounts should be mapped to the proper box in the 1099 tax forms. This is especially important for the 2020 tax year since the IRS has brought back the Form 1099-NEC which will be used to report any non-employee compensation, instead of being reported on the 1099-MISC form. Here is a link to that new form: https://www.irs.gov/forms-pubs/about-form-1099-nec.
With the return of Form 1099-NEC, the IRS has revised Form 1099-MISC and rearranged box numbers for reporting certain income. Changes to the reporting of income and the form’s box numbers include:
- Payer made direct sales of $5,000 or more (checkbox) in box 7.
- Crop insurance proceeds are reported in box 9.
- Gross proceeds to an attorney are reported in box 10.
- Section 409A deferrals are reported in box 12.
- Nonqualified deferred compensation income is reported in box 14.
- Boxes 15, 16, and 17 report state taxes withheld, state identification number, and amount of income earned in the state, respectively.
Important due date changes:
You will need to file Form 1099-NEC on or before February 1, 2021, using either paper or electronic filing procedures. File Form 1099-MISC by March 1, 2021, if you file on paper, or March 31, 2021, if you file electronically.
If you need any assistance with reviewing your QuickBooks file prior to these upcoming 1099 filings, or if you will need our firm to assist with your 1099 submittals for 2020, please reach out to one of our RAD Team staff members in Williston (802.878.1963) or Rutland (802.775.7132). We would be happy to assist you with this and any other accounting needs.
Written by Martha Leonard, Bookkeeper, RAD