Form 1099-K – The Internal Revenue Service (IRS) announced the delay of the new $600 Form 1099-K reporting threshold requirement for third party payment organizations for the 2023 tax year and is planning to implement the new law in 2024 with a new threshold of $5,000. For 2023 and any year prior, payment apps and online marketplaces are only required to send out Form 1099-K to taxpayers who receive over $20,000 and have over 200 transactions.
Form 1099-DIV – Dividends or other distributions from a current or former C-Corporation to a shareholder
Form 1099-INT – Interest on a business debt to someone, excluding interest on an obligation issued by an individual
Form 1099-R – Distribution from a retirement plan, profit sharing plan, IRA, or insurance contract to a plan beneficiary
Other Possible Reporting Situations
If, as part of your trade or business, you were subject to any of the following situations, the following may also need to be filed:
- Form 1098 – Payment of mortgage interest, including points, or reimbursements of overpaid interest from individuals
- Form 1099-A/Form 1099-C – You released someone from paying a debt secured by property or someone abandoned property that was subject to the debt (1099-A) or otherwise forgave their debt to you (1099-C)
- Form 1099-B – You are a broker and you sold a covered security belonging to your customer
- Form 1099-S – The sale or exchange of real estate
- Form 8937 – You are an issuer of a security taking a specified corporate action that affects the cost basis of the securities held by others
State Filing Requirements – Combined Federal/State Filing Program
The Combined Federal/State Filing Program (CF/SF) simplifies 1099 information returns. Through this program, the IRS electronically forwards information returns to participating states. In many cases, there may be nothing else you need to do but the CF/SF program may not completely meet the requirements of the state. Please verify the requirements directly with the Department of Revenue for the state in question.
Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Georgia, Hawaii, Idaho, Indiana, Kansas, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, Wisconsin.
States with no 1099 filing requirement:
Alaska, Florida, Illinois, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington, Wyoming
The following information returns may be filed under the CF/SF Program:
- Form 1099-B, Proceeds from Broker and Barter Exchange Transactions
- Form 1099-DIV, Dividends and Distributions
- Form 1099-G, Certain Government Payments
- Form 1099-INT, Interest Income
- Form 1099-K, Payment Card and Third Party Network Transactions
- Form 1099-MISC, Miscellaneous Information
- Form 1099-NEC, Nonemployee Compensation
- Form 1099-OID, Original Issue Discount
- Form 1099-PATR, Taxable Distributions Received From Cooperatives
- Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
- Form 5498, IRA Contribution Information
Not Required to File Information Returns
You are not required to file information return(s) if any of the following situations apply:
- You are not engaged in a trade or business.
- You are engaged in a trade or business, and either:
- the payment was made to another business that is incorporated, but was not for medical or legal services, or,
- the sum of all payments made to the person or unincorporated business is less than $600 in one tax year.
Cost-Effective Online Filing Options
If you need help filing your 1099s, we recommend the following:
QuickBooks Online (QBO) –
Offers an e-file service with fees starting at $4.99 per filing or a subscription of $15/month for up to 20 forms and $2 for each additional form thereafter. If you are using QBO, it more efficient to utilize QBO for 1099 reporting as well. This would save time as your vendor information is transferred over without having to enter the data. For more information, please click on the link below.
IRS-approved websites –
These providers electronically transmit the filings to the appropriate tax reporting agency and mail the recipient copy on your behalf. Once the data is entered, this service will electronically transmit the filing(s) to the appropriate tax reporting agency as well as mail the recipient copy on your behalf. This is a cost-effective means of filing your 1099s.
Tax1099 – https://www.tax1099.com (*Import with QuickBooks, Xero, Bill.com, and more)
As an alternative –
You may wish to consider using your payroll service to file these forms at year end. In addition, many service providers offer an arrangement where they will process payments to your vendors that require 1099s. The payroll service can issue these payments via check or direct deposit to the vendor and can accommodate the filing requirements to the appropriate tax authorities.
As a reminder, please note Newburg | CPA is not responsible for filing these forms on your behalf.
Form W-9 Requirements
Note that Form W-9 is required from vendors to collect tax information such as the vendor’s business name, address, and Tax Identification Number. This information is needed to file 1099s at year end. If you obtain the completed Form W-9 from each vendor before you issue them a payment, you will ensure that you have collected the required information for 1099 reporting.
Increased Penalties and Exposure
Failure to issue a 1099 can result in a disallowance of the deduction, as well as incurring a penalty for each 1099 not filed. Please note that maximum penalties per calendar year for the penalties below depend on the size of the business, but these maximum amounts can range from $195K to more than $1M per year.
The following penalties are in effect:
- $50-$270 penalty per information return for filing a 1099 up to 30 days late and after August 1st
- $550 penalty per information return for intentional failure to file, with no maximum penalty
In addition, if you have a corporation, partnership, or sole proprietorship, there are questions that are required to be completed relative to your 1099 responsibilities. Owners and officers of their respective businesses are signing the business’ return under penalties of perjury.
Visit the IRS website for further detailed information on 1099 filings: https://www.irs.gov/instructions/i1099mec
Please feel free to contact us directly with any questions.