A revitalized Form 1099. New responsibilities for reporting Covid-19 credits, deferrals, and paid leave. Let’s say you have some things to do between these corporate tax forms changes and the IRS reporting requirements, as well as everything else that’s going on at the beginning of 2021.
If you want to get a head start, read up on these changes now.
3 business tax forms with tricky report changes in 2021
You want 2021 to be your year, the year your business doesn’t have to struggle to stay afloat. So don’t be stumbled upon something as avoidable as changes to the way you report employee taxes and wages, contractor wages, or employer taxes.
The forms with the tricky report changes in 2021 include:
- Form 1099
- Form W-2
- Form 941 (or 944)
Let’s get into that right away. The sooner you know, the sooner you can get back to business – your business.
1. Form 1099
Why did the 1099 make my list of tricky report changes? Well, it’s not that it’s terribly tricky, but it has a trick up its sleeve if you will. The 1099-MISC form has magically disappeared – when it comes to reporting payments from independent contractors.
Now, report non-employee compensation on Form 1099-NEC, Non-Employee Compensation. That means you need to break out the 2020 form if you are paying contractors throughout the 2020 tax year.
The 1099-MISC (Miscellaneous Information) form is still available to report other types of 1099 payments, such as: B. Rent, prizes and awards, payments to a lawyer, etc.
So, if you are making both types of payments (different payments and non-employee compensation payments), use both Form 1099-NEC and Form 1099-MISC. And before you usually opt for a Form 1099-MISC to report non-employee compensation, figuratively slap yourself and reach for Form 1099-NEC instead.
This shift back to Form 1099-NEC (yes, back – those of us “old people” will remember it was last used in 1982) has nothing to do with Covid-19. Unless otherwise determined by the IRS, this is the new form for reporting non-employee compensation for years to come.
Other items from AllBusiness.com:
2. Form W-2
Contractor form? Check. Employee form? Here we go . . .
Each year you use Form W-2, Payroll and Tax Returns to report your employees’ taxes and wages. Your reporting needs tend to stay the same – until now.
Due to Covid-19, employees may have deferred their social security tax and / or received emergency paid leave (sick or family). You must report this on Form W-2.
If you have been granted paid sick or family leave under the Families First Coronavirus Response Act (FFCRA) employees, include the amounts and a brief description (available from the IRS) on Form W-2.
And now for the employee’s social security postponement. I am willing to bet some employers might stumble here. You must use Form W-2 to report an employee’s social wage who is subject to social security tax. After withholding deferred tax from your employee’s wages in 2021, you will need to order Form W-2C to report it.
3. Form 941 or 944
So we went through the wage and tax forms for contractors and employees. Here is our final tricky topic of discussion about major changes to corporate tax forms: Your Employer’s Tax Return Form (either Form 941 or Form 944).
If you’re using the Quarterly Form 941, you know that your fourth quarter form isn’t due until January. And if you use annual form 944, your annual form isn’t due until January either. This means that in 2021 you will have to report quite a bit on Forms 941 or 944. You must report deferred social security taxes along with claimed tax credits.
Here is a breakdown of what you need to report:
- Tax credits
- Deferrals
- Social security taxes for employees
- Employer’s social security taxes
Also, remember to declare the deferred social security taxes you are transferring on Forms 941 or 944 from 2021.
Checklist for conquering your reporting obligations
Everyone in the same boat as me will need your checklists to stay healthy. Remember to report:
- Payments to Independent Contractors on Form 1099-NEC
- Payments to other 1099 types on Form 1099-MISC
- Paid sick leave and family leave that you gave to employees on Form W-2
- Deferred social security tax for employees on Form 941 or Form 944
- Total wage subject to Social Security tax on Form W-2
- Deferred social security tax for employees who were withheld on Form W-2C (and 2021 Form 941 or Form 944)
- Employer’s Deferred Social Security Tax on Form 941 or Form 944
- Employer deferred social security tax that you paid on Form 941 or Form 944 in 2021
- Entitlement to Loyalty Credit on Form 941 or Form 944
- Eligibility for paid sick leave and family vacation tax credits on Form 941 or Form 944
RELATED: Business End-Year Compliance Checklist for Entrepreneurs
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