News & Tech Tips

Get Ready For the New Form 1099-NEC

Kathleen Hargrove on July 14, 2020

There’s a new IRS form for business taxpayers that pay or receive non-employee compensation.

 

Beginning with tax year 2020, payers must complete Form 1099-NEC, Non-employee Compensation, to report any payment of $600 or more to a payee.

 

Why the new form?

 

Prior to 2020, Form 1099-MISC was filed to report payments totaling at least $600 in a calendar year for services performed in a trade or business by someone who isn’t treated as an employee. These payments are referred to as non-employee compensation (NEC) and the payment amount was reported in box 7.

 

Form 1099-NEC was reintroduced to alleviate the confusion caused by separate deadlines for Form 1099-MISC that report NEC in box 7 and all other Form 1099-MISC for paper filers and electronic filers. The IRS announced in July 2019 that, for 2020 and thereafter, it will reintroduce the previously retired Form 1099-NEC, which was last used in the 1980s.

 

What businesses will file?

 

Payers of non-employee compensation will now use Form 1099-NEC to report those payments.

 

Generally, payers must file Form 1099-NEC by January 31. For 2020 tax returns, the due date will be February 1, 2021, because January 31, 2021, is on a Sunday. There’s no automatic 30-day extension to file Form 1099-NEC. However, an extension to file may be available under certain hardship conditions.

 

Can a business get an extension?

 

Form 8809 is used to file for an extension for all types of Forms 1099, as well as for other forms. The IRS recently released a draft of Form 8809. The instructions note that there are no automatic extension requests for Form 1099-NEC. Instead, the IRS will grant only one 30-day extension, and only for certain reasons.

 

Requests must be submitted on paper. Line 7 lists reasons for requesting an extension. The reasons that an extension to file a Form 1099-NEC (and also a Form W-2, Wage and Tax Statement) will be granted are:

  • The filer suffered a catastrophic event in a federally declared disaster area that made the filer unable to resume operations or made necessary records unavailable.
  • A filer’s operation was affected by the death, serious illness or unavoidable absence of the individual responsible for filing information returns.
  • The operation of the filer was affected by fire, casualty or natural disaster.
  • The filer was “in the first year of establishment.”
  • The filer didn’t receive data on a payee statement such as Schedule K-1, Form 1042-S, or the statement of sick pay required under IRS regulations in time to prepare an accurate information return.

Need help?

 

If you have questions about filing Form 1099-NEC or any tax forms, contact us. We can assist you in staying in compliance with all rules.

Economic Impact Payments Sent on Prepaid Debit Cards

Kathleen Hargrove on June 3, 2020

As more Economic Impact Payments continue to be sent out, the IRS has notified taxpayers that some payments are being sent by prepaid debit card instead of a paper check.
The debit cards arrive in a plain envelope from “Money Network Cardholder Services.” Nearly 4 million people are being sent their Economic Impact Payment by prepaid debit card. If you have not received your payment yet, be on the lookout and make sure not to mistake this for junk mail.
The determination of which taxpayers received a debit card was made by the Bureau of the Fiscal Service, a part of the Treasury Department that works with the IRS to handle distribution of the payments.
Those who receive their Economic Impact Payment by prepaid debit card can do the following without any fees:
  • Make purchases online and at any retail location where Visa is accepted
  • Get cash from in-network ATMs
  • Transfer funds to their personal bank account
  • Check their card balance online, by mobile app or by phone
This free, prepaid card also provides consumer protections available to traditional bank account owners, including protection against fraud, loss and other errors.
More information can be found on the IRS website here.
 
Our team will continue to monitor this for further developments and will update you with any added information. Feel free to contact your Whalen advisor with any questions.

Resources & Updates

Kathleen Hargrove on March 26, 2020

We have updated our crisis needs resource list and want to make sure these documents are available to all our clients and friends to utilize. Please review the links below with important resources and outlines of programs that are available for you:

 

 

We will continue to research and gather information and will be sure to send any updated resources out. As always, feel to reach out to us with any questions that you may have.

 

Updates on Whalen Procedures

 

  • First and foremost, we are available to serve you.
  • We are utilizing electronic options, such as a client portal and password protected e-mail, for sending and receiving documents.
  • If you are approved and  plan to be commuting for essential purposes:
    • We have a receptacle for your paperwork if you just wish to do a quick drop off that is located directly inside our front door.
    • If you would like to pick up your return, please call ahead so that we can have it ready for you and ring the bell at the front desk when you arrive and someone will assist you.

We will continue to monitor any updates from the state and CDC and will notify you should any of our procedures change.

 

Thank you again for your understanding and patience as we navigate through these times together.

 

2020 Census: What You Need To Know

Kathleen Hargrove on February 13, 2020

We recently had Mark Boyd, a partnership specialist with the U.S. Census Bureau, in to present some key information to our staff regarding the upcoming decennial survey. He made us aware of the importance of the data that is collected and what all this is used for, as well as provided pointers on keeping this information safe and protected from fraudsters.
The census provides critical data that lawmakers, business owners, teachers, and many others use to provide daily services, products, and support for you and your community. Every year, billions of dollars in federal funding go to hospitals, fire departments, schools, roads, and other resources based on census data. In addition, the results of the census also determine the number of seats each state will have in the U.S. House of Representatives, and they are used to draw congressional and state legislative districts.
With any sharing of data and personal information, there is always concern over privacy and security. Here are some helpful tips we learned that we wanted to share with you to help keep your information safe:
Avoiding Scams Online
Phishing emails often direct you to a website that looks real but is fake-and may be infected with malware.
It is important to know that the Census Bureau will not send unsolicited emails to request your participation in the 2020 Census. Further, during the 2020 Census, the Census Bureau will never ask for:
  • Your Social Security number
  • Your bank account or credit card numbers
  • Money or donations
In addition, the Census Bureau will not contact you on behalf of a political party.
Staying Safe at Home
If someone visits your home to collect a response for the 2020 Census, you can do the following to verify their identity:
  • First, check to make sure that they have a valid ID badge, with their photograph, a U.S. Department of Commerce watermark, and an expiration date.
  • If you still have questions about their identity, you can call 800-923-8282 to speak with a local Census Bureau representative.

 

Reporting Suspected Fraud
If you suspect fraud, call 800-923-8282 to speak with a local Census Bureau representative. If it is determined that the visitor who came to your door does not work for the Census Bureau, contact your local police department.

Numerous tax limits affecting businesses have increased for 2020

Kathleen Hargrove on January 30, 2020

An array of tax-related limits that affect businesses are annually indexed for inflation, and many have increased for 2020. Here are some that may be important to you and your business.

Social Security tax

The amount of employees’ earnings that are subject to Social Security tax is capped for 2020 at $137,700 (up from $132,900 for 2019).

Deductions

  • Section 179 expensing:
    • Limit: $1.04 million (up from $1.02 million for 2019)
    • Phaseout: $2.59 million (up from $2.55 million)
  • Income-based phase-out for certain limits on the Sec. 199A qualified business income deduction begins at:
    • Married filing jointly: $326,600 (up from $321,400)
    • Married filing separately: $163,300 (up from $160,725)
    • Other filers: $163,300 (up from $160,700)

Retirement plans

  • Employee contributions to 401(k) plans: $19,500 (up from $19,000)
  • Catch-up contributions to 401(k) plans: $6,500 (up from $6,000)
  • Employee contributions to SIMPLEs: $13,500 (up from $13,000)
  • Catch-up contributions to SIMPLEs: $3,000 (no change)
  • Combined employer/employee contributions to defined contribution plans (not including catch-ups): $57,000 (up from $56,000)
  • Maximum compensation used to determine contributions: $285,000 (up from $280,000)
  • Annual benefit for defined benefit plans: $230,000 (up from $225,000)
  • Compensation defining a highly compensated employee: $130,000 (up from $125,000)
  • Compensation defining a “key” employee: $185,000 (up from $180,000)

Other employee benefits

  • Qualified transportation fringe-benefits employee income exclusion: $270 per month (up from $265)
  • Health Savings Account contributions:
    • Individual coverage: $3,550 (up from $3,500)
    • Family coverage: $7,100 (up from $7,000)
    • Catch-up contribution: $1,000 (no change)
  • Flexible Spending Account contributions:
    • Health care: $2,750 (no change)
    • Dependent care: $5,000 (no change)

These are only some of the tax limits that may affect your business and additional rules may apply. If you have questions, please contact us.

Whalen CPAs
655 Metro Place South, Suite 450
Dublin, Ohio 43017
(614) 396-4200

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