This newsletter highlights the new rules and filing deadlines regarding Forms 1099 (NEC, MISC, K) and W-9 to help you stay on top of your reporting obligations and avoid potential penalties. Note: Recently, we have observed the IRS enforcing penalties on late, or unfiled 1099s. Please see more information on penalties below.

Yes, forms 1099 are information returns and need to be filed electronically via the Filing Information Returns Electronically (FIRE) system.

·     Beginning in calendar year 2024, tax year 2023, the IRS began requiring electronic filing (e-file) for businesses filing 10 or more information returns (previously, the threshold was 250 forms).

·     Businesses filing fewer than 10 forms can still file on paper, but e-filing is encouraged for accuracy and convenience.

Do you need an account to e-file?

Yes, you need to set up an account to e-file Forms 1099. This can be done in a few ways:

Directly with the IRS through the FIRE System:

·     Requires registration and approval, which can take up to 45 days.

·     FIRE System is primarily used for bulk filers and requires some technical setup.

Using an IRS-Authorized E-File Provider:

·     Many third-party platforms like QuickBooks, Tax1099, or Track1099 offer user-friendly solutions for creating and e-filing forms without needing to deal with the FIRE system directly.

·     These platforms often integrate with accounting software and help streamline the process.

For more information about the regulations and the reduced threshold to electronically file, refer to the IRS and Treasury’s final regulations on e-file and the Filing Information Returns Electronically (FIRE) webpages.

·     Reporting Threshold: Payments of $600 or more to a non-employee during the year.

Note: If payments were made to someone using a credit card, debit card, or through a third-party payment network (such as PayPal), Form 1099-NEC or Form 1099-MISC is not required, but are subject to 1099-K rules discussed below.

·     Deadlines:

·     Recipient Copy: January 31, 2025.

·     IRS Filing: January 31, 2025 (same for paper and electronic filings).

·     Extensions: Extensions are not automatic for 1099-NEC. They are granted only via Form 8809.

Form 1099-MISC (Miscellaneous Income):

·     Reporting Thresholds:

·     Rent, royalties, or other income payments: $600 or more.

·     Payments to attorneys: $600 or more.

·     Royalties: $10 or more.

·     Deadlines:

·     Recipient Copy: January 31, 2025.

·     IRS Filing:

·     Paper: February 28, 2025.

·     Electronic: March 31, 2025.

·     Extensions: Form 8809 can be submitted for an automatic 30-day extension. A second 30-day extension is possible but requires valid reasoning.

For the latest information about developments related to Forms 1099-MISC and 1099-NEC and their instructions, go to IRS.gov/Form1099MISC or IRS.gov/Form1099NEC.

Form 1099-K (Payment Card and Third-Party Network Transactions):

·     Reporting Threshold: Payments exceeding $5,000 (even for a single transaction, regardless of the number of transactions).

·     Deadlines:

·     Recipient Copy: January 31, 2025.

·     IRS Filing:

·     Paper: February 28, 2025.

·     Electronic: March 31, 2025.

·     Extensions: Same as 1099-MISC (Form 8809 for extensions).

More information about Form 1099-K filing requirement thresholds can be found in this IRS News Release and Notice 2024-85.

And additional information and instructions for the forms mentioned above and other information returns can be found in General Instructions for Certain Information Returns.

·     If forms are filed within 30 days after the deadline, the penalty is $60 per form.

·     Filing after 30 days but before August 1 increases the penalty to $130 per form.

·     Forms filed after August 1 incur a penalty of $330 per form

·     And in instances of intentional disregard can result in fines of at least $660 per form.

Failing to collect a valid Form W-9 from a payee can lead to penalties. A penalty is imposed on the payee—the individual or entity receiving payment—for failing to provide the payer with a taxpayer identification number (TIN). However, when a payee fails to provide the required information, the payer must initiate backup withholding at a rate of 24% on payments to the payee until a valid TIN is provided.

If the payer fails to implement backup withholding when required or neglects to request a valid TIN, the payer becomes liable for the uncollected backup withholding amount, along with potential additional penalties.

This information is detailed in the IRS’s Instructions for the Requester of Form W-9.

For more detailed guidance on penalties related to information return compliance, the IRS provides a comprehensive resource outlining the requirements, penalty amounts, and ways to address issues if you receive a notice. This includes information on filing deadlines, reasonable cause waivers, and options for paying penalties. To learn more, visit the official IRS page on Information Return Penalties.

Best Practices for Compliance

Our team is here to support you every step of the way, from clarifying the latest regulations to assisting with filing strategies tailored to your business needs.