The great thing about Mixed Federal State Submitting is that you just don’t should report the identical data twice on your federal and state/native taxes.
However final 12 months, the IRS didn’t embody its new kind for reporting non-employee compensation (1099-NEC) in this system. The shape is utilized by enterprise like Uber
UBER
For tax 12 months 2021, the shape is included within the sharing program. However now that states have their very own reporting methods in place, they’re reluctant to scrap them.
“The IRS actually fumbled [when] they failed to incorporate it in that sharing program,” stated Sovos tax professional Wendy Walker. “By having 36 states exit and construct their very own necessities final 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 means they must wait longer to get that data, which doesn’t make sense.”
As of mid-January, most of these 36 states are still requiring businesses to report their non-employee compensation immediately, in line with my evaluation and knowledge 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 adjust to these submitting necessities could also be penalized. Throughout a current webinar hosted by her firm, a ballot of the greater than 1,000 registrants revealed 51% of respondents indicated they didn’t adjust to their 2020 Kind 1099-NEC state reporting obligations.
If a enterprise deliberately disregards the requirement to supply an accurate payee assertion, it is topic to a minimal penalty of $550 per kind or 10% of the earnings reported on the shape, with no most.
The next states have launched new steering saying they may settle for the 1099-NEC from the IRS and companies don’t must file individually:
California, Hawaii, Illinois and New Jersey.
Employers have till Jan. 31 to submit their 1099-NECs.