Tax information reporting and withholding requirements are constantly changing. You cannot assume that specific requirements will stay the same from one year to the next (or be the same from one state to the next). Here are three keys to staying on top of your 1099 reporting:
- The IRS and state Departments of Revenue (DOR) are frequently updating policies regarding 1099 reporting. New forms, box changes, threshold changes, and reporting methods can make reporting a challenge and lead to penalties if you are not prepared. Changes often come at the last minute, catching many financial system providers and even experienced CPAs off guard. Subscribe to eFileMyForms for the latest regulatory updates, webinars, and content to ensure you have the knowledge you need for a successful reporting season.
- Regularly maintain your vendor/contractor data in your financial system. To avoid potential B-Notices, penalties, and the challenge of managing backup withholding, regularly verifying the name/Taxpayer Identification Number (TIN) combinations of your payees is a must. This is an easy process that should be completed in the fall, so you have time to solicit correct W-9 information if you have any mismatches. You can easily add a TIN check to your order in eFileMyForms or visit TINCheck.com if you would like to explore real-time options.
- If you do business with individuals, customers, or contractors in various states, you may have direct state 1099 reporting obligations. Many state obligations can be satisfied through the Combined Federal/State Filing program (CF/SF) but some forms like the 1099-NEC also have direct state requirements. Currently, more than 25 states, plus DC, require direct reporting of 1099-NEC data to the DOR. State reporting can be a challenge as states present a patchwork of rules, deadlines, thresholds, and filing methods that can make 1099 reporting more complicated and time-consuming. Visit our 1099-NEC State Reporting Services page to learn more about how eFileMyForms can help you simplify 1099-NEC state reporting.
Proactively preparing for 1099 reporting before January is an important step in ensuring a smooth and accurate annual reporting process.