If a poll of attendees of a recent IOFM webinar is any indication, it’s going to be a very busy Form 1099 reporting season in 2024 for your team.
More than half (57%) of the respondents expected to file at least 250 Forms 1099, which means they’ll be required by the IRS to electronically file them. Another third (33%) said they’ll be filing somewhere between one and 250. It’s a safe bet that many of them will trigger the new mandatory electronic filing threshold, which is 10 forms in aggregate from a long list of tax forms.
Ten percent said this would be their first year reporting income payments to a non-employee or vendor.
Countdown to 1099 filing is on
Penalties for not sending 1099 reports out on time now range from $60 to $310 per form, and at least $630 per form if the IRS thinks you intentionally disregarded reporting. Because you don’t want to see that kind of money fly out the window, here are the all-important deadlines your finance team needs to know.
Form 1099-MISC: Payees of at least $600 (or $10 in royalty payments) in 2023 must receive it by Jan. 31, 2024. The IRS electronic filing deadline is April 1, 2024, unless you’re filing a 30-day extension with Form 8809.
A big X factor is whether or not you have to report to any states that require 1099 reporting. During the webinar, Kelly Conner, director of product marketing for compliance reporting solutions and services provider Sovos, said, “Just because the IRS requires the information in March doesn’t mean states don’t require it sooner than March. And we see states deviating on their deadlines and their reporting requirements across the board.”
Form 1099-NEC: This form for at least $600 of non-employee compensation had been tripping up the IRS, as well as many taxpayers, according to Conner. Certain boxes on the form were creating confusing, separate filing deadlines for the exact same form.
The form has since been modified and it’s due to both payees and IRS by Jan. 31, 2024, Conner said. The agency is not granting extensions unless your company has sustained a catastrophic event. And if that is the case, be prepared to submit a statement with Form 8809, which will be scrutinized by the feds.
Form 1099-K: Unless you’re a payment settlement organization, your A/P team is probably not going to have to be concerned about completing a form for Payment Card and Third Party Network Transactions. But FYI, the deadlines mirror 1099-MISC.
This form is going to disrupt things at tax time, however, for contractors that received gross payment transactions from a payer of more than $600 in 2023 on a payment card, PayPal, Venmo or an online marketplace.
Even Florida and Tennessee, states which don’t tax income, will require 1099-K income reporting, Conner said.
Did you update your TCC?
Because e-filing is going to be a fact of life for a lot more businesses, having a transmitter control code (TCC) number is going to be essential.
Because Form 4419 no longer exists, if you didn’t migrate your existing TCC using the online-only information returns application for transmitter control codes by August 1, you must apply for a new TCC ASAP.
You’ll need an ID.me account to apply. If you don’t have one, set up an account here.
What to know about Form 1042-S
Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding, is actually “a very intense 1099 Miscellaneous form,” Conner said. It’s for reporting a variety of payments, including wages and compensation, interest, dividends, royalties, rent, scholarships and fellowships to a non-U.S. person or entity.
It’s important to know that these payments are subject to 30% federal withholding unless the payee has exemption or reduction documentation, and that’s where it gets complicated. Form 1042-S filing involves referring to a list of more than 400 income, status and exemption codes.
Payees and the IRS must receive 1042-S by March 15, 2024, unless you file Form 8809, which would extend the deadline to April 30, 2024. If you’re filing 1042-S, you must also file Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, with the IRS. Conner described Form 1042 as being like a cover letter where you list information like the number of 1042-S forms you’re reporting for each Employer Identification Number, etc.
A big reason why we’re mentioning Form 1042-S here is you’ll have to electronically file it if you’ve met the 10-form threshold with 1099s, W-2s, Forms 1095 for the Affordable Care Act, etc. But surprise – you can’t e-file 1042-S on the Filing Information Returns Electronically (FIRE) system or the Information Returns Intake System (IRIS) online portal.
According to Conner, 1042-S e-filing belongs on the IRS Modernized e-File system. “There are only two approved vendors (by the IRS) on the market right now … to do these forms electronically,” she said.