2020 Business Reporting Reminders Guide

December 2, 2020

As the year draws to a close, it is imperative to make sure you meet the reporting obligations as outlined below for:

  • Form 1099-MISC and 1099-NEC (NEW!)
  • S-Corporation Health Insurance
  • Personal Use of Employer-Provided Vehicle
  • Personal Property Tax and Business License Returns

 

Form 1099-MISC and 1099-NEC

There are several important items and key changes to consider for FORMS 1099-MISC/NEC, whether you prepare them yourself or request WellsColeman prepare them for you.

Beginning 2020, there is an update to how payments to vendors will be reported to the IRS.

  • FORM 1099-MISC will still be used for rents and royalties.
  • FORM 1099-NEC will be used to report nonemployee compensation.

Review your vendor lists and mark which vendors should receive a Form 1099-NEC or 1099-MISC.

  • Generally, any payee (other than a corporation) who is engaged in a trade or business and receives $600 or more in rents or other non-service related income from you during the year should receive a Form 1099-MISC.
  • Any payee (other than a corporation) who receives $600 or more from you for services should be issued a Form 1099-NEC instead of Form 1099-MISC.
  • One common exception is payment made to attorneys.  Attorneys should receive a Form 1099-NEC for services in excess of $600 regardless of whether or not they are incorporated.

Vendor setups must be complete with name, address, and identification number.

  • Errors are common in this area and if the information does not match what the IRS has on record, a letter will be mailed requesting you to begin backup withholding from the payee.  All vendors should complete a Form W-9 before any payment is made to ensure you have the correct information.

Forms 1099-NEC are due to recipients and the IRS by February 1, 2021. Forms 1099-MISC are due by March 1, 2021 if filing on paper, or March 31, 2021 if filing electronically.

  • If WellsColeman prepares your Forms 1099-MISC/NEC and Form 1096, we need your information no later than January 22, 2021.

Watch those penalties!

  • Failing to file information returns timely, failing to include all required information on the return, filing incorrect information such as an incorrect TIN or failing to report a TIN can result in sizable penalties.  The amount of the penalty is based on how late the information return is filed.

If you have any questions regarding the distinction between an employee (issued a Form W2) and an independent contractor (issued a Form 1099-NEC), please contact your WellsColeman advisor.

 

S-Corporation Health Insurance Reporting on Form W-2

More than 2% shareholders of S-Corporations must include health insurance premiums for the shareholder and his/her family on the shareholder’s annual W-2. 

  • The premium amount is included in Box 1 (Federal Wages) and Box 14 (Other) but is not included in Social Security or Medicare wages.
  • Please contact your payroll service provider and provide them with this information no later than December 15, 2020.

 

Personal Use of Employer-Provided Vehicle Reporting on Form W-2 

Employers must report this taxable non-cash fringe benefit on the employee’s annual W-2. It is subject to federal income tax, social security and Medicare tax, and FUTA tax.

  • The value is based on the fair market value of the vehicle and is calculated using one of the following three methods:  Annual Lease Value Rule, Cents-per-Mile Rule, or Commuting Rule.
  • Please contact your payroll service provider and provide them with this information no later than December 15, 2020.

 

Personal Property Tax and Business License Returns

Be mindful of what counties and localities you operate in and where your business property is located.

  • Not filing required returns or filing them late can result in additional penalties and interest. Most localities require you to obtain a business license, renew it annually, and pay annual taxes on your business property located in that jurisdiction.
  • Depending on the locality and your type of business, fees to obtain and renew business licenses are typically based on the gross receipts you earned in that locality during the year. Property taxes are generally based on the value of your property located in that jurisdiction at the end of the year.
  • The business license and personal property tax returns for most localities are due on March 1, 2021.
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