2021 Information Reporting Reminders
Organizations that make wage payments to employees—and certain payments to nonemployees—are required to report these transactions to the IRS by filing information returns. Copies of these returns also must be provided to the payment’s recipient. While Form W-2 is one of the most recognizable tax information returns, there are numerous transactions a taxpayer can participate in that also require filing a tax information return. IRS reporting rules vary based on the type and dollar amount of payment made. See the table below for a summary of filing requirements for the most common nonwage information returns.
Extension for Filing Information Returns
Form 8809 is used to request a 30-day extension to file Forms W-2, 1099, and other information returns. While the initial extension for forms other than Forms W-2 and 1099-MISC is automatic, Form 8809 also should be used to request a nonautomatic extension for Forms W-2 and 1099-NEC. An additional 30-day extension can be requested for all information returns except Forms W-2 and 1099-NEC. To be eligible for approval of a 30-day extension for Forms W-2 or 1099-NEC or an additional 30-day extension for all other forms, a filer must meet specific criteria, e.g., natural disasters, death or serious illness, the entity’s first year of business, a third-party payee statement wasn’t received in a timely manner, etc. The extension doesn’t extend the due date for furnishing statements to the recipients.
Information Reporting Reminders
Penalties for filing incorrect information returns or failing to furnish the correct statements to recipients can range from $50 to $280 per individual return. If improper filing is due to intentional disregard, the penalty increases to at least $570 per return. If you have an information reporting filing requirement, consider these best practices to help provide accurate and timely information to recipients and the IRS:
- Review the organization’s accounts payable procedures to maintain proper documentation for vendors.
- Require all new vendors to complete Form W-9, Request for Taxpayer Identification Number and Certification, prior to remitting payment.
- Review the current-year vendor listing for incomplete information and request a completed Form W-9, if necessary.
- Familiarize yourself with payroll processor deadlines and provide a year-end adjustment in advance of the final payroll to avoid potential fees for unnecessary amendments of tax and wage reporting forms.
- Review the organization’s general ledger and vendor listing to evaluate the overall filing requirement for each category of reported information. Pay particular attention to vendors with “LLC”—limited liability company—in their name. For tax purposes, such vendors may be treated as partnerships, disregarded entities, or corporations. In general, payments to a corporation (including an LLC that’s treated as a C or S corporation) don’t have to be reported on Form 1099-MISC.
- Verify the classification of the organization’s workers to assess whether the appropriate information return is filed, i.e., Form W-2 versus Form 1099-NEC.
- Under the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act, employers are required to report the amount of qualified sick leave wages and qualified family leave wages paid to employees in box 14 of the 2021 Form W-2 or on a separate statement.
- Electronic filing is mandatory for organizations required to file 250 or more information returns of the same type during calendar-year 2022 unless the IRS has granted a waiver. The IRS, however, encourages all filers to submit these returns electronically, even if they’re below the 250-return threshold. The IRS has proposed regulations that would decrease the mandatory electronic filing threshold to 10 returns for calendar years after 2022.
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