Quick Links to Specific Year-End Tax Planning Strategies & Checklists:

–    Year-End Tax Planning & Strategies Overview
–    Year-End Tax Planning – What’s New for 2020
–    Year-End Tax Planning Checklist for Individuals
–    Year-End Tax Planning Checklist for Businesses
   Year-End Checklist for  Payroll & 1099 Reporting       <– YOU ARE ON THIS PAGE

 

Year-End Tax Planning Checklist for Payroll and 1099 Reporting

√   Be sure your payroll amounts agree on all reports (Federal and State) BEFORE you send them in.  If the amounts do not agree, you will be notified and will have to correct the situation (which takes much longer than doing it right the first time).  We have a reconciling worksheet available to help you with this step.

√   Correctly report benefit amounts on W-2s. While most types of employee benefits are reported on form W2 without increasing wages, there are some benefits that should increase the wages reported in box 1. Examples include the personal usage of a company owned vehicle and company paid health insurance for S-Corp owners (2% or more).

√   Remember to file Form 1099’s.

Form 1099-NEC – **New**, beginning with the tax year 2020, businesses will be required to file Form 1099-NEC reporting payments for services of $600 or more to non-employees. This form replaces Form 1099-MISC, box 7 in prior years. This filing is due January 31, 2021.

The initials “NEC” on Form 1099-NEC stand for “Non-Employee Compensation”. It was last used in 1982. The following year, the IRS added box 7 to Form 1099-Misc to consolidate reporting. In 2015, the IRS tried to address income underreporting by changing the deadline for reporting non-employee compensation (Form 1099-Misc, box 7) to January 31st. The other income items reported on Form 1099-Misc have subsequent filing deadlines which created confusion and compliance issues. To address this conflict of filing deadlines, the IRS has reintroduces form 1099-NEC in 2020.

Form 109-MISC – Miscellaneous income is still reported on Form 1099-MISC. The 2020 version has remove non-employee compensation items.

    • Box 1 = Rents of $600 or more,
    • Box 2 = Royalties of $10 or more,
    • Box 3 = Other Income of $600 or more

LINK:  Instructions for Forms 1099-MISC and 1099-NEC

Other Form 1099’s may be necessary. Here are a few of the more common ones for your consideration.

Form 1099-DIV – Dividends & Distributions of $10 or more

Form 1099-INT – Interest Income of $10 or more

Form 1099-C – Cancellation of Debt of $600 or more

√   If you need help preparing payroll reports, W2s and/or Form 1099’s, please let us know in early January.

 

Circular 230 Disclosure: This is to advise you that, unless expressly stated, nothing in this communication (including any attachment or other accompanying materials) was intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding any federal tax penalties, or for promoting, marketing, or recommending a partnership or other entity, investment plan or arrangement to anyone.