IRS revises Forms 1099 instructions: Changes Finance must know

Get ready! IRS just released the latest draft of the instructions for Forms 1099-MISC and 1099-NEC.

Per the draft, the updated instructions should be effective January 2022. Here’s a rundown of what’ll be most important – especially for your A/P team.

Latest updates to forms

The new instructions note that Forms 1099-MISC and 1099-NEC have become “continuous-use” forms, along with their instructions.

This means that the forms will no longer be updated annually. Instead, IRS will revise them as needed throughout the year. So be on the lookout for more frequent revisions.

Also watch for a new box 13 on the latest edition of the forms. Box 13 will be designated for filing requirements of the Foreign Account Tax Compliance Act (FATCA).

Because of this addition, boxes 13-17 on the old forms have been renumbered to boxes 14-18 on the new forms.

The instructions also contain a note about a big change that would likely affect how your entire company submits tax returns to IRS: the implementation of the electronic filing requirements laid out in the Taxpayer First Act of 2019.

This would allow the agency to lower the threshold for filing electronic returns from 250 to 100 returns. Per the draft instructions, if this occurs, it’ll be valid for tax year 2022. The e-filing requirement will be in place for 2023. So your team won’t have to worry about it for this year-end, at least.

Keep in mind, though: The new threshold will apply to all of a company’s tax returns – not just Forms 1099-MISC and NEC.

We’ll keep you posted once IRS finalizes these changes.

Important reminders

Besides updated filing info, the draft instructions for Forms 1099-MISC and NEC also contain helpful reminders for submitting the form after year-end.

The deadlines will remain the same in 2022. Form 1099-NEC must be submitted by January 31, whether it’s filed on paper or electronically. With Form 1099-MISC, Finance must submit the form to IRS by February 28 if filing on paper and March 31 if it’s filed electronically.

To more easily provide people with copies of the forms, IRS now has online versions of copies B, C, 1 and 2 available. The forms are saved as PDFs that can be edited online and provided to your payees. You can also complete them for your internal records.

Another thing to keep in mind: Companies can either use box 2 of Form 1099-NEC or box 7 on Form 1099-MISC to report sales of $5,000 or more of any product for resale, as well as products sold on a buy-sell or a deposit-commission basis.

If you use Form 1099-NEC for this, it must be submitted to IRS by the January 31 deadline.

The new instructions also contain info about what you should do if you need to file corrections for previously submitted forms. If you have to file a correction on a paper form, don’t check the VOID box on the form. This signals IRS’ software to automatically ignore this form when it’s processing returns, so the correction won’t be entered.

For the proper correction procedure with paper forms, see part H in the most recent General Instructions for Certain Information Returns. The procedure for electronic corrections is in Publication 1220.

Need more 1099 info?

To learn more about updated 1099 requirements, Premier Learning Solutions is offering a workshop: Form 1099 Reporting Updates for Timely, Compliant Filing.

The workshop will be available on demand. It covers:

• what’s changed on Forms 1099 for 2021
• the latest reporting requirements you need to know to stay timely and compliant
• keys to avoid penalty notices and increased costs for noncompliance
• updated criteria to determine who’s an independent contractor or an employee
• completing forms W-9 and W-8 and backup withholding, and
• what types of payments go into which boxes on 1099 forms.

For registration and additional info, click here.