The following is from the October 2020 issue of The PIOGA Press.

The PATH Act of 2015 created two separate filing due dates for amounts reported on the same Form 1099-MISC. Specifically, 1099-MISC forms reporting amounts in Box 7 for non-employee compensation were due by January 31 of the following year, while 1099-MISC forms reporting rents, royalties or other types of income were not due until February 28 if filing by paper and March 31 if filing electronically. To minimize confusion and administrative burden caused by separate due dates for the same form, the Internal Revenue Service has changed the way non-employee compensation must be reported on Form 1099 for 2020.

1099 form changes

Beginning in 2020, payments made in the course of your trade or business to non-employees for services rendered totaling $600 or more, as well as income earned by working interest owners, must now report in Box 1 of Form 1099-NEC. These payments were previously reported on Form 1099-MISC in Box 7.

Rental payments, including payments for a right-of-way and royalty payments, will continue to be reported on Form 1099-MISC in Boxes 1 and 2 as they have been in the past.

The 1099-NEC Form for 2020 will need to be filed on or before February 1, 2021. The filing dates for the 1099-MISC have not changed. For 2020 filings, the forms are due to the IRS by March 1, 2021, if filed by paper or by March 31 if filed electronically.

1099 Form Changes – Filing with the IRS

The Taxpayer First Act of 2019 changes how we file Form 1099s with the IRS:

  • For the 2020 tax year, you are required to file electronically if you have 250 or more 1099 Forms (100 or more for partnerships).
  • For the 2021 tax year, you are required to file electronically if you have 100 or more 1099 Forms (50 or more for partnerships).
  • For the 2022 tax year, you are required to file electronically if you have 10 or more of any information reporting form (1099 or W-2) with the IRS. Failure to do so will result in substantial penalties.

While some of the information is reported on a new form, the circumstances that create a filing requirement have not changed. Business owners should be proactive in preparing to meet their Form 1099 filing requirements.

Steps to take in order to prepare for these changes―forms and submission

  • Request current IRS Form W-9 from vendors.
  • Request for Taxpayer Identification Number and Certification from each payee covered under the reporting requirements. Ideally, Form W-9 should be completed before issuing any payments to avoid potential backup-withholding requirements. While Form W-9 does not expire, it is important to make sure payees periodically confirm that the information on the original form has not changed.
  • Check for changes to a business name, address or Taxpayer Identification Number (TIN). These changes require a new Form W-9. Additionally, if you file 1099s on paper forms, make sure you purchase the proper forms for 2020 reporting.
  • If you file 1099s electronically, you should verify that your e-filing system is ready to handle this change. If you currently do not file these returns electronically. you will need to find a way to file 1099 Forms electronically. Options include but are not limited to:
    • The IRS has a system called “FIRE” that you can utilize for electronically filing.
    • Purchase additional software that will assist you with this filing.
    • Contact a tax professional who can assist you.

Keep in mind that some states such as Pennsylvania require that copies of 1099 Forms be filed with their state tax authorities and may have tax withholding obligations on payments made to non-resident payees. Check with all states in which you do business for any filing and tax withholding requirements related to remittance of the 1099 Forms.

Also, just a reminder that all 2020 1099 Forms need to be sent to the payees before February 1, 2021.

PIOGA’s Annual Oil & Gas Tax and Accounting Seminar

This year’s seminar is going virtual and will be held in conjunction with the Independent Oil & Gas Association of West Virginia and the Southeastern Ohio Oil and Gas Association. It will take place November 18 from 9 a.m. to 4:30 p.m., and as always will be presented by associates from Arnett Carbis Toothman LLP.

The following important and timely topics are on the agenda:

  • General Tax Updates for 2020 – Federal and State
  • Oil & Gas Industry Tax Updates for 2020
  • CARES Act
  • Paycheck Protection Program – Forgiveness, Tax and Accounting Considerations
  • Purchase/Sale, Valuation, Succession and Estate Planning
  • IT Security

Oil and gas investors, operators, royalty owners, service companies, and accounting and legal professionals will benefit from participating. Find out more and register here.

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