Tax Advisor 2020

Organizations that make wage payments to employees, and certain payments to nonemployees, are required to report these transactions to the IRS. Copies of these returns also must be provided to the payment’s recipient. While Form W-2 is one of the most recognizable tax information returns, there are numerous transactions a taxpayer can participate in that also require a tax information return to be filed. IRS reporting rules vary based on the type and dollar amount of the payment made. See the table below for a summary of filing requirements for the most common nonwage information returns. 

Filing Requirements Summary

*For 2020 forms filed in 2021, January 31 is a Sunday; official form due date is February 1
**For 2020 forms filed in 2021, February 28 is a Sunday; official due date is March 1 
***A $600 reporting threshold applies in certain situations
****Filers of more than 250 information returns (by type of return) are required to file electronically with the IRS

What’s New for 2020

The Protecting Americans from Tax Hikes Act of 2015 accelerated the information return reporting due date for 1099s reporting nonemployee compensation to January 31. In response to this new due date, the IRS has reintroduced Form 1099-NEC. Beginning with the 2020 calendar year, amounts paid for nonemployee compensation will be reported on Form 1099-NEC and the boxes on Form 1099-MISC have now been modified and don’t include a box to report nonemployee compensation.  

Also new for 2020, employers are now required to report the amount of qualified sick leave wages and qualified family leave wages paid to employees pursuant to the Families First Coronavirus Response Act, P.L. 116-127, in box 14 of the 2020 W-2 or on a separate statement. 

As a part of the employer shared responsibility provisions of the Affordable Care Act, certain employers are still required to report information about their healthcare coverage to the IRS. 2020 Forms 1095-B and 1095-C now include additional offer of coverage codes for Health Reimbursement Arrangements as, under certain conditions, these plans may satisfy certain requirements of the employer shared responsibility provisions. 2020 Form 1095-C also has been updated to include new fields to report an employee’s age and ZIP code.

Extension for Filing Information Returns

Form 8809 is used to request a 30-day extension to file Forms W-2, 1099, and other information returns. While the initial extension for forms other than Forms W-2 and 1099-MISC is automatic, Form 8809 also should be used to request a nonautomatic extension for Forms W-2 and 1099-NEC. One additional 30-day extension can be requested for all information returns except Forms W-2 and 1099-NEC. To be eligible for approval of a 30-day extension for Forms W-2 or 1099-NEC or an additional 30-day extension for all other forms, a filer must meet some specific criteria, e.g., natural disasters, death or serious illness, the entity’s first year of business, a third-party payee statement wasn’t received in a timely manner, etc. The extension doesn’t extend the due date for furnishing statements to the recipients. 

Information Reporting Reminders

Penalties for filing incorrect information returns or failing to furnish the correct statements to recipients can typically range from $50 to $280 per individual return. If improper filing is due to intentional disregard, the penalty increases to at least $560 per return. If you have an information reporting filing requirement, consider the following best practices to help provide accurate and timely information to recipients and the IRS: 

  • Review the organization’s accounts payable procedures to maintain proper documentation for vendors.
  • Require all new vendors to complete Form W-9, Request for Taxpayer Identification Number and Certification, prior to remitting payment.
  • Review the current-year vendor listing for incomplete information and request a completed Form W-9, if necessary.
  • Familiarize yourself with payroll processor deadlines and provide a year-end adjustment in advance of the final payroll to avoid potential fees for unnecessary amendments of tax and wage reporting forms.
  • Review the organization’s general ledger and vendor listing to evaluate the overall filing requirement for each category of reported information. Pay particular attention to vendors with “LLC”—limited liability company—in their name. For tax purposes, such vendors may be treated as partnerships, disregarded entities, or corporations. In general, payments to a corporation (including an LLC that’s treated as a C or S corporation) don’t have to be reported on Form 1099-MISC.
  • Verify the classification of the organization’s workers to assess whether the appropriate information return is filed, i.e., Form W-2 versus Form 1099-NEC.
  • Electronic filing is mandatory for organizations required to file 250 or more information returns of the same type, unless the IRS has granted a waiver. The IRS, however, encourages all filers to submit these returns electronically, even if they’re below the 250-return threshold.

For more information, reach out to your BKD Trusted Advisor™ or use the Contact Us form below.

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