What is the Combined Federal State Filing Program?
The Combined Federal State Filing (CF/SF) program was created more than 20 years ago by the IRS to help lighten the administrative burden on small businesses reporting 1099 information to states. This program aims to help integrate federal and state filings. The IRS uses the information filed in federal returns and then forwards that information to the individual states on a business’ behalf.
What should I know about Combined Federal State Filing?
There are a few important things to note about the CF/SF program. First, not all 50 states participate in the program. It’s also worth mentioning that even though a state may accept certain form types through the CF/SF program, that same state may still require certain forms to be filed directly. Monitoring which states you have direct state reporting obligations in, and for which form types, is crucial to ensure accurate reporting and minimizing state penalties. This is especially true if your company conducts business in multiple states.
When a state requires direct reporting, it can specify how it wants to receive information in three different ways:
For states that do participate in the CF/SF program:
- The state can satisfy its requirements with CF/SF filings.
- The state can require reporting in addition to or instead of the CF/SF filings.
For states that do not participate in the CF/SF program:
All information is required to be reported directly to the state. This option is more complex for the filer but gets the information to the state more quickly.
Which states participate in the CF/SF program?
The following states currently participate in the CF/SF program: 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 and Wisconsin.
If you file Form 1099 with the IRS, your business likely has a direct state reporting obligation. In tax year 2022, 43 states required direct state reporting of at least one type of 1099 form.
Are there any limitations or watch outs with the CF/SF program?
While the CF/SF program does help facilitate 1099 information between the IRS and states, there are a few limitations and watch outs to be aware of.
- The CF/SF program does not satisfy all 1099 requirements. For example, only 11 forms were included in the program for tax year 2022. These include 1099-B, 1099-DIV, 1099-G, 1099-INT, 1099-K, 1099-MISC, 1099-NEC, 1099-OID, 1099-PATR, 1099-R, and Form 5498
- Not all form types required by the states are supported with the CF/SF program. For example, 34 states require businesses to report Form W-2G, but it is not included in the CF/SF program.
- The timing of the states receiving 1099 information can be tricky. Typically, the IRS does not share original return information with the states until late-April or later, long after income tax refunds have been issued to taxpayers. As a result, some states don’t participate in the CF/SF program and instead require direct state reporting. Other states require direct state reporting for all 1099 information regardless of their status as a participating CF/SF state.
For states that do participate, they may require returns to be filed earlier than the IRS deadline. For example, Form 1099-MISC has an IRS filing deadline of March 31 for certain payment types, but Washington D.C. requires direct reporting of all 1099s by January 31.
One final watch out is the history of form 1099-NEC with the CF/SF program. When the 1099-NEC was reintroduced by the IRS in tax year 2020, the decision was made not to include the new form in the CF/SF program. As a result, more than 35 states implemented a direct reporting requirement for 1099-NEC returns. So, while the IRS decided to include the 1099-NEC in the CF/SF program the next year (tax year 2021), many states have continued to require direct reporting of this common form.
Staying up to date with the reporting requirements for each state can be a challenge. State reporting obligations add to the complexity of determining what information must be reported, when to report it and how. eFileMyForms can help with both federal and 1099-NEC direct to state 1099 filing. Visit our 1099-NEC Direct State Reporting page to learn more.