IRS ‘Fumble’ Way Additional Tax Reporting For Companies In Extra Than 30 States

The wonderful thing about Blended Federal State Submitting is that you just don’t must document the similar knowledge two times to your federal and state/native taxes.

However ultimate 12 months, the IRS didn’t come with its new shape for reporting non-employee repayment (1099-NEC) in this system. The shape is utilized by trade like Uber

UBER
and Doordash that rent impartial contractors to do paintings. Because of this, 36 states that take part within the blended tax reporting program scrambled to enact their very own direct reporting requirement.

For tax 12 months 2021, the shape is incorporated within the sharing program. However now that states have their very own reporting methods in position, they’re reluctant to scrap them.

“The IRS in reality fumbled [when] they failed to incorporate it in that sharing program,” stated Sovos tax professional Wendy Walker. “Through having 36 states cross out and construct their very own necessities ultimate 12 months, why would they wish to shift again over to the IRS’ sharing program this 12 months? In the event that they did, it approach they must wait longer to get that knowledge, which doesn’t make sense.”

As of mid-January, maximum of the ones 36 states are nonetheless requiring companies to document their non-employee repayment without delay, consistent with my research and data from Sovos. They’re:

Alabama, Arizona, Connecticut, Delaware, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Utah, Vermont, Virginia, West Virginia and Wisconsin.

Walker stated she’s involved that companies who don’t conform to those submitting necessities is also penalized. All over a up to date webinar hosted through her corporate, a ballot of the greater than 1,000 registrants published 51% of respondents indicated they didn’t conform to their 2020 Shape 1099-NEC state reporting responsibilities.

If a trade deliberately disregards the requirement to supply a right kind payee observation, it is matter to a minimal penalty of $550 according to shape or 10% of the source of revenue reported at the shape, and not using a most. 

The next states have launched new steerage announcing they are going to settle for the 1099-NEC from the IRS and companies don’t wish to record one at a time:

California, Hawaii, Illinois and New Jersey.

Employers have till Jan. 31 to post their 1099-NECs.