New Rules for Submission of 1099 Forms

Rules and deadlines for filing 1099 forms are constantly revised and it’s important for tax professionals to stay on top of the changes. Here are two changes coming for the upcoming tax filing season involving 1099-MISC and 1099-K.

New IRS rules for submitting late 1099-MISC with Box 7

Starting in January 2019, the IRS will institute new rules regarding how to submit 1099-MISC with Box 7 and those without Box 7 after the due date of January 31, 2019. If submitted improperly, companies may receive penalty notices for their non-Box 7 1099-MISC forms. These new rules apply to both paper and electronic filing.

What this means: After January 31, 2019, 1099-MISC with Box 7 filled in should be filed separately from 1099-MISC with any other box filled in. As an example, on February 5, if you have a 1099-MISC with Box 7 and a 1099-MISC with only Box 1 filled in and your e-file provider has put them in the same record, as per last year’s format, the MISC with Box 7 will be flagged as late, which indeed it is. The challenge is, however, that the 1099-MISC with Box 1 may also be flagged as late, even though it is not, since it is not due until Mar. 31.

It is important to make sure your e-file provider is following the correct IRS transmitting rules that separates the 1099-MISC reporting after the January 31 deadline to prevent companies from getting erroneous section 6721 penalty notices who are not filing with Box 7.

For more details, see https://www.irs.gov/forms-pubs/changes-to-current-forms-publications/filing-forms-1099-misc-with-nec-in-box-7-with-the-irs-dec-2017

If companies do accidentally submit non-Box 7 1099-MISC along with late Box 7 forms and get a Notice 972CG, A Penalty is Proposed for Your Information Returns, according to the IRS they may respond and clarify the content of the submission, indicating the number of Forms 1099-MISC that did not report Box 7.

New 1099-K State Filing requirements with Gross Amount more than $600

Certain states are starting to require submitting 1099-Ks that have more than $600 in Box 1a Gross Amount, which is far less than the $20,000 minimum required for federal reporting.

The IRS does not currently require companies to submit 1099-Ks unless the Box 1a Gross Amount for the year is at least $20,000. However, individual states have become attuned to the income reporting possibilities with this form and are mandating submission of the 1099-K for gross payments more than $600. This $600 is the same threshold for 1099-MISC Box 7 reporting.

For various reasons, many companies prefer not to report to the IRS the 1099-Ks that do not meet the federal threshold of $20,000. This does not remove their requirement to submit to their state the 1099-Ks that are more than $600, but less than $20,000.

At the moment, Massachusetts and Vermont have implemented the reporting requirement for 1099-K with more than $600. Be sure to stay up to date with your particular state’s rules as they may pick up this requirement in the future.

See more:

https://www.mass.gov/technical-information-release/tir-17-11-new-massachusetts-reporting-requirements-for-third-party

http://tax.vermont.gov/news/1099-k-information-reporting

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S. Lindsey West is a Stanford aerospace engineer who founded Track1099 in 2010, creating an online IRS e-file and e-delivery platform that has served more than 100,000 businesses filing 1099-MISC, W-2, W-9, 1095-C and other IRS-related forms.