As you operate and pay business expenses throughout the year, you are required by federal law to issue various Forms of 1099s and/or W2s at the end of the year if they apply to your business. These forms and notices notify the recipient & the IRS that the recipient has income that they should be reporting. Below is a basic guideline for the filing requirements & the information needed for HBE to assist with the filings for the following common forms. If you have questions or concerns that are not specifically addressed bellow, please contact your HBE team member with questions.
1099 General Information (all form types)
- You are generally NOT required to report payments to incorporated businesses, with the exception of payments to attorneys in the course of ordinary business. An LLC may or may not be considered incorporated for tax purposes. The best practice is to request/have on file a Form W-9, completed by the vendor for vendors that fall into the previously listed scenarios. Copies of the Form W-9 can be found on the IRS.gov website.
- To avoid IRS penalties for incorrectly filed returns, you are required to keep a copy of all Form W9s for all vendors on file. Be advised that the Nebraska Department of Labor requires the taxpayer to have verification on file of any contactor who is not an employee in the form of invoices or other written contracts between both parties. You are NOT required to report payments made with a credit card, debit card, or third-party payment network (example would be PayPal). You would only report the payments that were made via check or cash.
1099-NEC Information
Form 1099-NEC is new for 2020. Form 1099-NEC is dedicated to reporting “Nonemployee Compensation” that was previously reported in box 7 of the Form 1099-MISC. The following types of payments will be reported on Form 1099-NEC:
- Payments of $600 or more for services (including payment for parts and materials) rendered to your business by any non-employee individual or unincorporated business.
- Payments of $600 or more paid to any attorney in the course of ordinary business (regardless of whether they are incorporated or not).
- Payments that are associated with Gas or Oil Wells that are classified as working interest.
1099-MISC Information
Beginning in 2020, only the following types of payments will be reported on Form 1099-MISC:
- Payments of $10 or more for royalties.
- Payments of $600 or more for the following:
- Rent to unincorporated landlords including real estate & pasture/cash rent for farmland.
- Prizes and awards to non-employees, and fees to a physician, physician’s corporation, or other supplier of health and medical services.
- Payments to all veterinarians must be reported in Box 6 (regardless of if they are incorporated or not).
- If you had a foreign agricultural worker, please let your HBE team member know for more specifics.
1099-DIV Information
If your business is a C Corporation that has distributed funds to the shareholders as dividends, the business is required to issue a 1099-DIV to the shareholder recipient.
1099-INT Information
If your trade or business has a private business loan with yourself, a family member, or another individual/business and has paid more than $600 in interest to the recipient, a 1099-INT needs to be issued to the recipient.
Clients using QuickBooks Desktop: Please send a backup of your file(s) as soon as possible after processing your final checks for 2020 and completing the bank reconciliations for December so that a report for 1099 vendors can be generated. Please also be sure to include the version of QuickBooks you are currently using along with applicable passwords. Please update information in the file for your 1099 recipients (i.e. names, addresses, and social security numbers—a checkbox is available for vendors who should receive a 1099). There is a procedure within QuickBooks for “mapping” your vendors and accounts to the 1099 Form.
If you should need assistance, please contact our office at 402.423.4343.
Clients using QuickBooks Online: Please follow the guidelines above for desktop QuickBooks & notify us when your file is ready to proceed.
Clients NOT using QuickBooks: Please make sure that you are submitting the most current information. The worksheet enclosed in your year-end packet may be utilized to assist you in reporting this information to our office.
Additional fees may be incurred for corrected forms due to inaccurate information provided to us as these forms will require subsequent filing with the appropriate government agency. Therefore, it is your responsibility to submit complete and accurate information. Failure to file a correct Form 1099 or provide correct payee statements, without reasonable cause, may subject the payer to penalties. The penalty for failure to file these forms is up to $550 per return with no maximum, unless the failure is due to reasonable causes.
Payroll Returns and W2 Information
If HBE did not prepare quarterly payroll returns for January through September 2020, copies of all prior quarterly returns for 2020 MUST be received before HBE can process the annual returns.
Clients using QuickBooks Desktop: Send in a backup of your file as soon as possible after processing your last payroll to employees for 2020 and completing the bank reconciliations for December. Please ensure the name, address and Social Security number of each employee is correct. Also, be sure to include the version of QuickBooks you are currently using along with applicable passwords. If you should need assistance, please contact our office at 402.423.4343.
Clients using QuickBooks Online: Please follow the guidelines above for desktop QuickBooks & notify us when your file is ready for to proceed.
Clients NOT using QuickBooks: Wage information must include Gross Wages, Social Security, Medicare, and amounts withheld for Federal Income Tax, Social Security, Medicare, State Income Tax, 401(k) and Health Insurance. Additionally, for 2020, please include full details regarding any pay given and tax deferrals used for considerations related to COVID-19 and the Families First Coronavirus Response Act or the CARES Act. Please contact your HBE team if you have questions regarding either of these items.
Listed below is additional information that is necessary for the preparation of your Forms W-2/W-3. If you have questions concerning any of the items listed, please contact your accountant.
- Cost of employer-paid medical and life insurance for a 2% or more shareholder of an S-Corp
- Personal use of company-provided auto information, if applicable
- Amount of employer paid group-term life insurance premiums over $50,000 in face value for employees
- Amount of employer paid Disability Insurance for employees
- Amount of retirement contributions made by an employee pre-tax AND type of retirement plan (i.e. SIMPLE, 401(k))
- Employee contributions to an HSA
- Employer contributions to an HSA, if includable in the employee’s income
- Amount of dependent care benefits withheld and paid through a Section 125 Plan
- Whether or not the employee was an active participant in a company sponsored retirement plan for any part of the year
- Employer provided health reimbursement arrangements
Additional fees may be incurred for corrected forms due to inaccurate information provided to us as these forms will require subsequent filing with the appropriate government agency. Therefore, it is your responsibility to submit complete and accurate information.
General Information
To safely and securely send this information to our office, please visit our website here, click on the “Send Files” drop down menu in the upper right corner and select “Client Documents” If you work with a specific HBE team member you may instead choose “Select Recipient” and choose to send it directly to your assigned accountant.. You may also email this information directly to your assigned team member or our general bin for processing to begin. Should you have any additional questions or concerns, do not hesitate to contact our office at 402.423.4343.