New Form for Subcontractors
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In previous years, payments to subcontractors of $600 or more were reported on Form 1099-MISC in Box 7 for "Non-Employee Compensation". There were a bunch of other boxes for everything from Rents to Legal Fees to Fishing Boat Proceeds (?!?). This year there is a new form solely for Non Employee Compensation (the most frequently used box) called Form 1099-NEC.
NEW FORM 1099-NEC (NON EMPLOYEE COMPENSATION)
WHO IS REQUIRED TO FILE?
- If you paid anyone for business services of $600 or more during the tax year, you should send them a Form 1099-NEC. Please note that this applies to all business activities including rental businesses so don't forget about those rental repair people!
ARE THERE ANY EXCEPTIONS?
- Payments to Corporations: You do NOT have to give 1099-NEC forms to entities taxed as corporations (note: LLCs may be taxed in different ways, so you should get a W9 to verify the LLC structure),
- Payments via Credit Card/Paypal: payments made via third party processors (credit card, paypal or other third party electronic processors) are reported via 1099-K by the 3rd party processor and therefore you don't need to make 1099s for these payments.
- Payments for Merchandise/Products: If you are actually buying a product rather than a service, you don't need to send a 1099. Sometimes this is a tricky distinction for artists: is it a service or a product? Did I hire someone to paint a mural on my wall (service) or did I buy a canvas that was painted (product)?
WHAT IS THE DEADLINE TO FILE?
- 1099-NEC is due January 31st (matches W2 deadline)
- 1099-MISC (for Rents/Royalties/etc..) is due Feb 28th OR March 31st if filed electronically.
HOW DO I MAKE THESE FORMS FOR SUBCONTRACTORS?
- Yearli: We suggest you make 1099s online and file electronically. The IRS handling of mail has been slow and unreliable, so filing online assures that you receive a confirmation and that forms are processed in a timely manner. This referral link gives you a 15% discount on their normal fee (full disclosure: they do send us an amazon gift card for new users). It's a pretty simple process to file these online. We can file these for you, but we would be charging you an extra $15 per form to type them into the same site online that you could do yourself.
- Intuit Online Payroll or Quickbooks: If you already have a subscription to payroll services from Intuit and need to make 4 or more 1099s, this will be cheaper than Yearli (if you have just 1-3 forms to make, yearli is cheaper).
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A MESSAGE FROM MARK AND ALYSSA
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In speaking with some clients recently, they informed us that our quippy emails and humorous gifs as well as our generally positive--if possibly sarcastic--demeaner doesn't clearly portray how challenging our job has become this past year. They suggested that we should let all of you in a little on how we're really feeling as we head into another tax season: this has been the most difficult, never-ending ever-changing year in our 20 year tax career thus far. It feels like the last tax season never ended and now another is beginning. Our staff has been amazing and has worked doubly hard this entire past year (in isolation at home without break), and now we are heading into another tax season full of new rules, new processes and new challenges.
Through all of that, we know that our job is even more important to all of you this year as you also try to navigate these difficult times. Our goal is to be a resource for all of you through the ever-changing federal, state and local tax rules, regulations and relief programs. To continue to do this and do it well, we really really need your help on these two things this tax season:
- Fill out our Tax Organizer: After 2020, the answer "Same as Last Year" doesn't really apply to anyone, anywhere. We can't assume anything for anyone's return this year and working remotely makes it all the more challenging. So even if you haven't filled this out in the past, we need you to sign and submit this to us with your tax forms at least 2 business days in advance of your appointment. It is the number one way you can help us help you file efficiently and without errors (and hopefully find a few extra deductions/credits too!)
- Upload your information at least 2 Business Days in Advance of your Appointment: Our entire process has changed this year: appointments are all going to be via video. Our staff is working from home. We really need your help to send us your forms digitally in advance of your appointment to keep this new process flowing. We estimate that we will spend 50% more time on each tax return this year, but in doing so, we hope that our new process will be more beneficial to you: a) you save time by not driving through the cold, and b) by doing data entry in advance, we can use our appointment time with you to discuss your situation in more detail and plan better for the future. This new system will only work if everyone sends their information in advance by MORE than two business days. Please help us keep providing great service at an affordable price to all of you by uploading your forms and Completed Tax Organizer at least 2 business days in advance of your appointment (we'd love even more time if you can give it to us!).
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Our Secure Portal is even more mobile friendly this year, so even if you don't have a scanner, you should be able to take pictures of tax forms and upload them from your phone or tablet (but PDF files with OCR are greatly appreciated if you have the skills and software to do so!). If you cannot send your forms in this manner, it will cause delays in processing and we will also need to charge an additional fee of at least $25 for the cost of scanning, processing and postage if you need/want to submit paper forms.
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Thanks again for sticking with us through this past year. We hope you've stayed healthy and hopeful for the future. We know it's been a challenging year for many of you and we appreciate that you trust us to help you navigate these strange and taxing times.
Mark, Alyssa and the Fox Tax Crew
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IMPORTANT UPCOMING DEADLINES
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Below is a list of upcoming due dates. Please let us know if you need help with any of these filings (preferably long before said deadline dates).
- JANUARY 15:
- 4th Quarter Estimated Tax Payments: See links on our website where you can pay both IRS and MN online.
- JANUARY 20:
- JANUARY 31:
- 1099-MISC, 1099-NEC and W2s: If you have employees or subcontractors, W-2s and 1099s need to be printed and mailed to them. There is a NEW FORM 1099-NEC for subcontractors this year. We suggest you make them online here at YEARLI for a small fee each.
- Quarterly payroll reports
- FEBRUARY 5:
- Annual MN Sales Tax Report: If you have a MN Tax ID#, you need to file online, even if you don't collect Sales Tax! You still need to report Use Tax on items purchased online without paying sales tax at time of purchase.
- MARCH 15:
- S-Corporation and Partnership Tax Returns
- MNCare Tax: Medical practitioners need to file annual report listing all medical service income in MN.
- APRIL 15:
- Individual Income Tax Returns
- FBAR filing online: If you have $10,000 or more in foreign bank accounts/asssets, you should file this online (no tax due, just informational reporting--with hefty penalties for not doing it!)
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