Last year, for 2020 tax reporting, the IRS opened its vault and unearthed Form 1099-NEC. This was a tax form that had been out of use since the 1980s, but after the IRS revised and reinstated it, it was Form 1099-NEC’s time to shine.
From the tax year 2020 and beyond, employers are required to file Form 1099-NEC to report all non-employee compensation. This is the second tax year that 1099-NEC is in use, therefore employers and tax professionals are now much more comfortable with it. However, there will be a few new changes to Form 1099-NEC for the upcoming tax season.
What are the 1099-NEC Updates for the 2021 Tax Year?
Box 1 of Form 1099-NEC is used to report non-employee compensation. Cash payments for the purchase of fish for resale purposes covered under section 6050R should no longer be included in Box 1.
Box 2 will now have a checkbox. If you are reporting direct sales totaling $5,000 or more of consumer products to the recipient for resale, check this box to indicate this.
There is no longer an option to check the box to indicate FATC requirements (Foreign Account Tax Compliance).
The Form 1099-NEC has also been resized for 2021. This change will be a welcome one for printers everywhere, now three copies of the 2021 form will fit on a single page.
Are there any Changes to the IRS E-filing Requirements?
There is not a clear answer to this question yet, however, the IRS has proposed new requirements. The current threshold for e-filing is 250 forms. This could be reduced to 100 as soon as 2022, and then further slashed to just 10 in coming years.
This proposal remains unfinalized by the IRS, however, it is likely there will soon be movement on this front. As IRS information comes in, TaxBandits will continue to bring you updates.
Is there a change in the deadline to file Form 1099-NEC?
Unlike the other forms in the 1099 forms, the Form 1099-NEC has a different deadline. Because your independent contractors use 1099-NEC to report their income to the IRS on their personal income tax return, they need it earlier. Like Form W-2 for employees, Form 1099-NEC is due to the IRS on January 31.
In addition to filing Form 1099-NEC with the IRS, you must also distribute copies to all of your recipients by January 31. For 2022, the deadline falls on a Monday.
E-file your 1099-NEC Efficiently with TaxBandits
TaxBandits updates its secure e-filing process to accommodate all the IRS changes of Form 1099-NEC for the 2021 tax year. In addition, we offer you a complete compliance solution! You can file Form 1099-NEC with the IRS, fulfill your state filing requirements, and distribute your recipient copies all with TaxBandits.
When it comes to recipient copies, you can choose from postal mailing or online access options. TaxBandits is able to accommodate postal mailing at any volume, plus we validate your recipients’ addresses against the USPS records to ensure that they are accurate before sending.
Are you ready to get started with TaxBandits for all of your filing needs?
Don’t forget to stock up on your prepaid credits for the upcoming tax season, this helps you save time and money!