Tax CPA Explains 1099 Changes for 2020. Don’t Miss Them.
Preparing your W-2s and/or 1099s, like most things about the year 2020, will be slightly different. Below, we’ve outlined a brief overview of the changes; but as always, feel free to contact a tax CPA here at Perry & Associates if you have further questions after reviewing.
More 1099s may be filed this year than any other year. Because of the many jobs lost to the COVID-19 pandemic, a great number of people took up contract work in order to help pay the bills.
If your business hired anyone – or any non-incorporated partnerships or LLCs – to conduct contract work for you last year, you may need to prepare a 1099 form. This would apply to any hired work that received a cash or check compensation of $600 or more.
Unlike previous reporting years, you will need to prepare a 1099-NEC (Non-Employee Compensation). This is different from the 1099-MISC you would have filed for contract work in the past. Notice that this excludes contract work payments made via credit card. All business credit card payments will be reported in 1099-Ks, which crediting merchant and third-party payment processors are responsible for generating. Do not generate 1099-NECs for contractors paid via credit card, only those paid with cash and/or check.
Types of payments that warrant the filing of a 1099-NEC for reporting year 2020:
- Contract Labor, Commissions, Directors Fees, and any other like services provided to your business of $600 or more.
- Dividends, Interest, and Royalties of $10 or more.
- Professional Fees of $600 or more.
- Rents (other than to real-estate agents) of $600 or more.
- Attorney fees for legal services over $600.
- ALL payments to attorneys for settlements.
The deadline for submission of all 1099 forms to the IRS for reporting year 2020 is February 1, 2021. Your copies of these 1099s should also be distributed to their recipients on or before February 1, 2021.
If you have over 250 returns (W2s AND/OR 1099s) to file, it is required that you file all federal forms electronically. A tax CPA can quickly and efficiently assist you in your 1099 preparation.
The following wages must be included in Gross Wages on all employee W2s if applicable:
- Any other compensation
- Business expenses paid in excess of allowed amounts
- Sick pay
- Club dues
- Event tickets
- Plane flights
- Discounts on property or services
- Legal and educational services
- Value of life insurance group policy in excess of $50,000
- In some cases, moving expenses, educational assistance payments, and scholarships paid to an employee must be reported. Please contact us if you are unsure whether or not this applies to you.
- As always, employers’ contributions (matches) to retirement plans are not to be reported and are not taxable.
When to call a Tax CPA Instead of Using Software
There are many different online software options for preparing these forms; however, when it comes to all the unprecedented situations 2020 brought, a tax professional may be a wise choice for this year’s tax and employee form preparation.
Non-compliance fees and late fees can pile up fast for innocent mistakes small business owners make when attempting to prepare their own W2s and 1099s. It will not only be costly to you if you miss something, but it can also affect your employee and contractor returns as well. It is undoubtedly worth paying a far less cumbersome amount to a Tax CPA than it is to be indebted to the IRS.
Looking for a Tax CPA Near You?
Contact us for service you can trust! Perry & Associates CPAs has multiple offices throughout the Mid-Ohio Valley.
313 Second St
Marietta, OH 45750
Office: (740) 373-0056
749 Wheeling Ave, Suite 300
Cambridge, OH 43725
Office: (740) 435-3417
St. Clairsville, OH
150 W Main St, Suite A
St. Clairsville, OH 43950
Office: (740) 695-1569
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Vienna, WV 26105
Office: (304) 422-2203
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Office: (304) 232-1358