Changes to W2 &1099 Forms for 2020

Major changes to 1099MISC

If you use 1099MISC to report nonemployee compensation, you MUST CHANGE to 1099-NEC forms for 2020.

Major changes to E-Filing Requirements

If you have 100+ 1099 or W2 forms, you MUST E-FILE in 2020.
This will change again in 2021, when efiling will be required for 10+ forms.

1099 Form Due Dates for 2020. 

The new 1099NEC forms must be mailed to recipients and e-filed or mailed to the IRS on or before February 1, 2021.

For other 1099s, file by February 28, 2021, if you file on paper, or by March 31, 2021, if you file electronically.

The due dates for furnishing payee statements remain the same.

New E-Filing Requirements

For payers with 100+ 1099 forms, E-Filing is required in 2020.

This will change to just 10+ forms in 2021.

DiscountEfile.com helps you get it all done, easily!

 

New 1099-NEC Forms for Nonemployee Compensation

The 1099-NEC is a new form for business taxpayers to report payments of nonemployee compensation.

Starting with tax year 2020, taxpayers must complete this form to report any payment of $600 or more to a payee.

Generally, this form is due by January 31st but for 2020 tax returns, the due date is Feb 1,2021 because the 31st is a Sunday.

There is no automatic extension for this form but may be available under certain hardships.

Nonemployee compensation may be subject to backup withholding if a payee has not provided a taxpayer identification number to the payer or the IRS notifies the payer that the TIN provided was incorrect.

More information about this form can be found here: Form 1099-NEC, Nonemployee Compensation

1099-MISC Changes

Due to the creation of Form 1099-NEC, the Form 1099-MISC has been rearranged and boxes renumbered.

  • Payer made direct sales of $5,000 or more (checkbox) in box 7.
  • Crop insurance proceeds reported in box 9
  • Gross proceeds to an attorney are reported in box 10.
  • Section 409A deferrals are reported in box 12.
  • Nonqualified deferred compensation income is reported in box 14.
  • Boxes 15, 16 and 17 report state taxes withheld, state identification number and amount of income earned in a state.
1099-R Changes

Use Code 1: to report a distribution of up to $5,000 for a qualified birth or adoption that is exempt from the 10% early distribution tax and that can be repaid.

1099-PATR Changes
New boxes were added and existing boxes were renumbered, retitled, and/or repurposed to allow for reporting information to patrons needed for section
199A. (boxes 2, 5, 6, 7, 8, and 9)

Box 13 title and content change.

5498 Form Changes
Box 11: RMD required checkbox. Don’t forget that RMDS were impacted by section 114 of the SECURE Act as well as CARES Act.

New repayment code has been added “BA” for reporting a repayment of a qualified birth or adoption distribution. (box 14a and 14b)

1042-S Form Changes

Box 3b and 4b (tax rates): The revised backup withholding rate under section 3406 (24%) has been added to the Valid Tax Rate table.

Boxes 12b, 12c, 13f, 13g, 15b, 15c,16d, and 16e (Chapter 3 status code) :

  • The following codes have been deleted: 01 (US Withholding agent), 02 (US Withholding agent – other), 34 (US Withholding agent – foreign branch of FI)
  • The following codes have been added: 36 (Foreign Govt – Integral Part) and 37 (Foreign Govt. – Controlled Entity).
  • Code 19 has been updated from “Govt. or International Org.” to “International Organization”

Box 12f (country code): If the withholding agent is a US person or a foreign branch of a US person, filers are not permitted to enter “US” in box 12f even though US is not a code on the list.

TIN Masking
Recipient SSN masking is allowed on all 1099’s and new this year , it is also allowed on electronically filed W-2 recipient copies.

Note: some states may not allow TIN masking on the state copy. It is up to each individual state for the W-2.

Non-Dated, Continuous Use 1099 Forms

The following forms and instructions have been converted from annual updates to continuous use.
– Form 1097-BTC
– Form 1098-C
– Form 1098-F
– Form 1098-MA
– Form 1098-Q
– Form 1099-CAP
– Form 1099-LS
– Form 1099-OID
– Form 1099-LTC
– Form 1099-Q
– Form 1099-SA
– Form 1099-SB

1099 Rules that can make or break you
Here is a great article from Entrepreneur Magazine about who is required to file 1099 forms and why, the exceptions and how you can be proactive about 1099s to protect your business from large penalties. 

Read the Article

Due Date for W2 Copy A

February 1, 2021 is the deadline for W-2 Forms for tax year 2020.

This includes: W-2, W-2AS, W-2CM, W-2GU, W-2VI, W-3 and W-3SS with the SSA. The due date is now February 1 whether you file using paper forms or electronically.

You no longer get more time to e-file or print and mail copies to the SSA.

New E-Filing Requirements

For payers with 100+ W2 forms, E-Filing is required in 2020.

This will change to just 10+ forms in 2021.

DiscountEfile.com helps you get it all done, easily!

Truncation of SSN on Employee Copies

For data security, employee SSN can be truncated on employee copies. 

  • Do not truncate on Copy A
  • Do not truncate on paper filed W-2s
Civilian Spouses of Service Members
Civilian spouses of service members can elect to use the same residence for purposes of taxation as the service member
Moving Expenses
The only amounts to be reported in Box 12 under code P “Moving Expenses” are for reimbursements paid directly to a member of the US Armed Forces
Penalties increased
Failure to file and failure to furnish penalties and penalties for intentional disregard of filing and payee statement requirements have increased due to adjustments for inflation. The higher penalty amounts apply to returns required to be filed after December 31, 2020.
Sick & Family Leave Wage Reporting

The Families First Act generally required employers with less than 500 employees to provide paid leave due to COVID-19 and/or sick leave under certain conditions.

Employers are required to report the amount of qualified sick and family leave wages paid to employees under sections 7001 or 7003 of the Families First Coronavirus Response Act (FFCRA) on Form W-2.

In addition to including qualified sick leave wages in boxes 1, 3 and 5 of the W-2, employers must report the following type and amount of wages that were paid separately on Form W-2, Box 14 or in a statement provided with the W-2. The description given for each entry must include language described by the IRS in Notice 2020-54.