Right from 2021, IRS has been steadily making changes in 1099s & W-2s to make the filing more efficient and accurate in terms of compliance and reporting. While it has updated 1099-MISC, 1099-NEC, it has also made quite a few changes to 1099-K as well.
As a trusted remote accounting firm that specializes in 1099 and W-2 processing services, our accountants stay abreast of these updates to help businesses stay complainant of updated rules and regulations. As we approach the deadline for filing, we have prepared a quick list of 1099 & W-2 updates that every business need to know before filing them for 2021.
Updates Every Business Must Need to Know Before Preparing 1099:
1.1099-NEC: IRS introduced a new form 1099-NEC which requires business taxpayers to report their compensation to non-employees for services rendered in 2020 and beyond. A business that has made payment of more than $600 or more to a non-employee or independent contractor need to use this 1077 NEC in place of 1099-MISC.
The payments here refers to the compensation made to individual, corporation, estate or partnership made for services in course of the business. The compensations here can be in the form of fees, commissions, benefits, prizes or awards. Since 1099 NEC for the year 2021 is due Feb 1, 2022, so it is good practice to collect a W-9 from a vendor to know the 1099 suitability.
2.1099-MISC: Due to the introduction of 1099-NEC, the 1099-MISC has also been made a few corrections. 1099 MISC now should be used for payments of $600 or more made for rent payments, prizes, or awards, crop insurance, health and medical payments during 2021.
The due date for filing 1099 MISC is March 1 2022. So businesses must collect W-9 from vendors to determine the requirement of 1099 and get the filing done as swiftly as possible.
3.1099 INT: Interest payments made to an unincorporated entity are required to be reported using 1099-INT, Typical brokerage firms, banks or investment firms send out these forms. If you are one of them please mind that the due date for 1099-INT filing is February 1 2022.
4.1099-K: 1099-K was originally brought in by IRS to ensure accurate reports of online sales and transactions. This form is to be submitted to IRS and the seller by credit card companies detailing all the transactions processed by them. So if you are an online business that accepts online payments, you will be receiving a detailed snapshot of the transaction to help you file taxes.
Previously the threshold for the 1099-K was either of $20000 or more than 200 payment card transactions (credit, debit or store cards). However, from 2022, the threshold is changed to $600 i.e. any online business that has made more than $600 in online sales will receive a 1099-K form for submission. This new revision was made by IRS to ensure accurate reporting of income in the light of the rise in the gig economy and self-employment options.
W-2 Updates for 2021:
- IRS has updated the form W-2 reporting requirements which get applied to sick and family leave wages (qualified) that were paid in 2021 under FFCRA. Employers (eligible) are to report qualified leave wages in box1, 3 & 5 of Form W-2. That said IRS states that only eligible employers who claim FFCRA tax credits are to report the aforementioned sick and family leave wages.
- The health insurance that was paid on the behalf of a shareholder (S-corporation) need to be included in W-2 to enable deduction of the same in their return.
- Premium payments that were made on the employee’s behalf is to be considered as additional compensation.
- Payment that is discriminatorily made on the behalf of the employee is to be considered as additional compensation as well so it must be adjusted in the form W-2.
- Most importantly, W-2 are dues on January 31 2022.
Outsource & Simplify Your 1099 & W-2 Filing with Outsourced Bookkeeping:
As said earlier, IRS is consistently making revisions to ensure accurate and efficient filing of taxes and this is where businesses and employees must pay extra attention to get them right. However not every business is equipped with sufficient manpower, expertise, diligence or time to get all of them right. If you are a business that needs a helping hand with your 1099 and W-2 processing then Outsourced Bookkeeping can help.
With a team of trained accounting resources headed by experienced CPAs, Outsourced Bookkeeping has perfected the art of delivering accurate, efficient and timely 109 and W-2 preparation services. From document and statement printing, mailing to filing your 1099 and W-2s, our team of experts will get you done everything seamlessly.
We know how valuable is your time during this part of the year which is why you Outsourced Bookkeeping is here to help with our 1099 and W-2 processing services. You can contact us here: https://outsourcedbookeeping.com/