Form 1099-MISC Changes – Here are some updates to look for on Form 1099-MISC for 2021.
As the 2021 calendar year comes to an end, the other side of the New Year awaits us to prepare and file tax returns before the due dates. Businesses try their best to organize all their tax information before the holidays to come back to the drafted returns in the New Year.
If you think you’re all good to go, you might be in for a little surprise.
With an aim to further accelerate voluntary compliance and allow businesses to be more transparent, the IRS has published a few updates to Form 1099-MISC.
Form 1099-MISC, as you may know, is one of the most crucial information returns for businesses as it reports a variety of miscellaneous transactions in a tax year. The new changes introduced will have an impact on the way businesses have been approaching certain miscellaneous transactions.
The following will discuss in detail the updates and how they affect tax information reporting for the 2021 tax year.
Let’s get to it.
Updates To Form 1099-MISC: What’s New?
Change Of 1099-MISC’s Designated Title
The IRS has changed the title of Form 1099-MISC from ‘Miscellaneous Income’ to 1099-MISC, ‘Miscellaneous Information’. This change comes after Form 1099-NEC was introduced back in 2020, which specifically deals with non-employee compensations.
Take a look at the form below with the updated title.
Change In Reporting For Box 7 Of Form 1099-MISC
This change is in correlation with the IRS Form 1099-NEC, non-employee compensations. The IRS requires the filer to report the sale of consumer products amounting to $5000 or more for the purpose of resale on Box 7 of Form 1099-MISC or on Box 2 of Form 1099-NEC.
It is essential to note that Box 7 was earlier used to report non-employee compensations. Since the re-introduction of Form 1099-NEC, Box 7 of Form 1099-MISC is no longer used for reporting non-employee compensations.
Change in Box 11 of Form 1099-MISC
Any cash payments amounting to $600 or more made to an individual who is engaged in the fish trade must be reported on Box 11 of Form 1099-MISC.
Previously, this box was reserved (as seen in the images above) but the new update requires businesses to report such cash transactions along with the proof of such transactions (filed separately). The update requires businesses to enter only the dollar value in the box and not the information.
Restrictions on paper filing
Keeping scenarios, such as the Omicron variant outbreak, general pandemic, and the rise of the digital tax era in view, the IRS is restricting the paper file volume from 250 to 100. This volume might go as low as 50 or even 10 as more tax years unfold. For now, the IRS is sticking to a threshold of 100, post which the filers must opt to eFiling.
How To eFile Form 1099-MISC Online?
Many businesses have chosen to file their returns electronically given the significant risks of choosing paper filing. Due to the limited staff availability and the rampant encouragement from the IRS to choose electronic filing methods, taxpayers are shifting their approach.
However, choosing the right platform to file your returns electronically is crucial since you’re dealing with sensitive information.
Tax1099, an IRS-authorized agent of the IRS would be a good start for businesses that are not so familiar with the eFiling processes. The interface makes tax information reporting a cakewalk. You can securely submit your returns online within minutes through Tax1099.
And if you’re used to eFiling and are browsing around for better solutions, Tax1099 is all geared up to impress you with sleek features, a simplified 3-step eFile process, the industry’s most-loved integrations, advanced security enhancements, and much more.