Important Changes to 1099 Reporting

January 19, 2024 by Gordon Advisors

If you are a business owner who has paid for services, understanding the Forms 1099 and their reporting deadlines is essential for compliance with the Internal Revenue Service (IRS). All businesses are mandated to issue Forms 1099 to non-employee individuals, attorneys (including corporations), and companies (excluding corporations) to whom at least $600 has been paid for services during the twelve months leading up to December 31, 2023. The deadline for reporting Form 1099-NEC is January 31, 2024.

The IRS has announced an important change to Form 1099 reporting this year. If your business possesses ten or more information returns, your organization is now required to file electronically. This change encompasses both 1099 forms and W-2s.

Businesses have the option to electronically file any Form 1099 using the Information Returns Intake System (IRIS). This system also allows you to submit corrections and request automatic extensions for Forms 1099. IRIS offers two methods of e-filing.

E-Filing through the IRIS Taxpayer Portal

The IRIS Taxpayer Portal is a free, web-based filing system. Using this method, you can file up to 100 returns at a time manually or by a .csv upload. Additionally, you have the option to download payee copies for distribution, keep records of completed, filed and distributed forms, and manage issuer information.

To utilize this method, your business will need an IRIS Transmitter Control Code (TCC). This code identifies your business as you e-file forms. The process to receive a PIN is 45 days. If you have not done this yet it is too late for the 2023 filing season. However you may want to get the PIN for future years. To apply for an IRIS Taxpayer Portal TCC click here.

E-File with software through IRIS Application to Application (A2A)

If your company already possesses a third-party software or service, you may use IRIS A2A to e-file thousands of returns at once. For more information on software specification and next steps, refer to the IRIS E-Filing A2A document here.

Forms 1099 Reminders:

Non-employee compensation and attorney fees will be reported on Form 1099-NEC for 2023, while other services, including rent, will be reported on Form 1099-MISC.
Payments received through payment settlement entities, such as third-party payment processors like PayPal or credit card companies will get reported on a 1099-K; payments made via cash, check, or bank transfers are reported on a separate 1099.
Various types of income, including casual labor, commissions, rent, dividends, and interest, must be reported using specific 1099 forms.
In addition to filing with the IRS, the State of Michigan and relevant cities imposing income tax also require copies of any 1099 NEC issued for services performed or 1099 MISC for rent received in Michigan to be filed with their respective government offices.
To ensure accurate reporting, it’s essential for businesses to have the correct information from the payee through the use of a W-9 form. Ensuring your business has a signed W-9 on file for each 1099 issued is crucial for avoiding fees.
Payments to foreign persons are also subject to information reporting. Payments made may be subject to U.S. withholding at a tax rate of 30%. Foreign persons receiving income from U.S. sources must provide Form W-8BEN (for individuals) or W-8BEN-E (for entities) for payments made to nonresident aliens. Form 1042 may need to be filed.

Gordon Advisors has 70 years of experience being a trusted steward of our clients financial reporting. Contact our team today for guidance on your 1099 reporting.