As businesses prepare for year-end reporting, here are some of the most notable requirement and form changes for this tax season.
Form 1099-K is used to report payment card and third-party network transactions to the IRS. In an effort to improve voluntary tax compliance and reduce the tax gap (the difference between what taxpayers owe and what they pay on time), the American Rescue Plan Act was signed into law in March 2021. This law reduces the reporting threshold associated with Form 1099-K from $20,000 in aggregate payments and 200 transactions down to $600 in aggregate payments, regardless of the number of transactions.
This change will significantly impact most gig workers (including, part-time work, side jobs or the sales of goods. Think: Etsy, Uber, DoorDash, Etc.) and third-party settlement organizations.
Find more information about Form 1099-K at IRS.gov.
Continuous Use Forms
Several 1099 forms are changing to continuous use forms this tax year. Prior to this change, these forms included the tax year on them and were updated annually. Meaning even if no other changes were made to the form, businesses would need to order new paper forms each year to stay compliant. Now these forms will only be updated as needed, include a revision date, and businesses will need to print the current filing year themselves. This is good news for businesses, as they can order quantities ahead for multiple tax years, however they do this at their own risk. Any revisions to the forms would render previous versions unusable. The IRS is doing this because historically these forms don’t change too frequently. Although, as seen in recent years, the IRS has made annual updates on some of the most popular form types. Consequently, it's important for businesses to stay up-to-date on these changes and prepare accordingly before the year-end deadlines.
Here are the most popular forms impacted by this change this tax year:
- 1099-K and more…
Visit IRS.gov to find other forms not listed above and more filing information.
The future of electronic filing has a looming threshold drop. Regulations released in July 2021 recommend that the e-file threshold for information returns be lowered to 10 in Tax Year 2022 (to be filed in 2023). This proposed regulation includes the total for all aggregated forms filed. This means the e-file threshold would apply to a combined total of 10 or more information returns, regardless of form type, requiring many businesses to electronically file. The current law requires businesses to e-file if they file 250+ forms. Businesses filing less than 250 forms are still encouraged to e-file but have the option to submit paper filings by the year-end deadline. While this threshold reduction has not been finalized, the IRS can decide to implement this at any time.
Is your business prepared to e-file? Learn more about the requirement changes here.
How to Prepare for the Filing Season
Preparing early gives businesses the best advantage to avoid fines and year-end stress. The extra time will allow businesses to learn about current compliance changes so reporting data or forms can be prepared and processed accordingly.
How can you get help with filing and compliance information? One of the best ways for businesses to get help with all the changing regulations and requirements annually, is to use a filing resource like Nelco, a leader in W-2, 1099 & 1095 forms and technology. Nelco’s team of experts stay on top of all the federal and state requirements year-round. They offer software compatible year-end forms and supplies, while keeping their customers informed and help with any filing questions. In addition, they offer completely paperless filing options through 100s of software providers. Many businesses already have their services available in their software. They make filing simple and efficient while helping businesses meet all their requirements.