Key 1099 Filing Insights: Stay Informed on Important Requirements

Earlier this year the Department of the Treasury and the Internal Revenue Service issued final regulations on electronic filing (e-file) for businesses who use 1099s. Starting in 2024, certain filers, including those of partnership returns, corporate income tax returns, and others, will be required to e-file them. Paper filing is no longer an option. Additionally, you must file 1099 Forms electronically if you have 10 or more information returns (down from 250). Filers must aggregate almost all return types covered by the regulation to determine whether they meet the 10-return filing threshold. (This includes such forms as W-2s, 1099s, and other business return types.)

WHAT DOES THIS MEAN FOR MY BUSINESS?

The move toward increased e-filing aims to enhance efficiency, reduce costs, and accommodate the growing volume of information returns received by the IRS. This change for many businesses includes:

• Mandatory E-Filing. If your business falls under the categories mentioned above, you will be required to submit certain tax returns electronically rather than using traditional paper filing methods. Most importantly this includes the 1099s.
• Limited Paper Submissions. The regulations reduce the threshold for mandatory e-filing to 10 or more returns in a calendar year, down from the previous 250-return threshold. The IRS has also eliminated the e-filing exception for income tax returns of corporations reporting total assets under $10 million. Additionally, partnerships with over 100 partners and those required to file at least 10 returns of any type during the calendar year must e-file.
• Penalties if You Don’t Comply. If a business is required to file electronically but fails to do so with Form 1099-NEC or Form 1099-MISC, it’s subject to a minimum penalty of $630 per form (tax year 2023) or 10% of the income reported on the form, with no maximum.
• Preparing in Advance. Although the final regulations include hardship waivers for filers facing difficulties with e-filing requirements and administrative exemptions to facilitate effective tax administration, it is strongly advised not to overly depend on these allowances. Since this change is set to take effect in 2024, it’s advisable to start preparing well in advance. Familiarize yourself with the electronic filing process, ensure your systems are compatible, and address any potential challenges.
• Utilizing the 1099 Taxpayer Portal. If you are new to electronic filing, you may want to consider using the new 1099 Taxpayer Portal that provides a no-cost option for electronic filing of the Form 1099 series returns. Also known as the Information Returns Intake System (IRIS), you can e-file any Form 1099 for tax year 2022 and later with it. The system also lets you file corrections and request automatic extensions for Forms 1099. PLEASE NOTE: To use the Taxpayer Portal, you need an IRIS Transmitter Control Code (TCC). This 5-digit code identifies your business when you e-file forms. It can only be used for IRIS. It may take up to 45 days to receive this code, so do not delay.  Access IRIS Application for TCC, by clicking here.

IMPORTANT CALENDAR REMINDERS

To timely prepare and e-file your forms, provide your data to your tax team by Jan. 15, 2024.

 

FEDERAL 1099-NEC DEADLINES

• Recipient: January 31, 2024
• Paper: January 31, 2024
• E-file: January 31, 2024

 

FEDERAL 1099-MISC DEADLINES

• Recipient: January 31, 2024
• Paper: February 28, 2024
• E-file: April 1st, 2024

 

HOW KATZABOSCH CAN HELP

If you have questions or concerns regarding these changes, consider consulting with tax professionals or advisors. The professionals at KatzAbosch will provide guidance tailored to your specific business situation and help ensure compliance. To timely prepare and e-file your forms, provide your data to your KatzAbosch team by Jan. 15, 2024.