It’s the time of the year when employers prepare their year end paperwork for the IRS. Talkeetna has a high number of small businesses and self-employed contractors who send or receive 1099s. But this year has seen some changes.
For years, employers reported payments made to subcontractors on the 1099-miscellaneous form, under box 7, the non employee compensation section. This year that section is gone from the 1099-misc form. Payments now will be reported on a new form, 1099-NEC. Natalie Paris of Three Rivers Bookkeeping explains who can expect to use the 1099-NEC.
“Anything that’s gonna go on this new form, 1099-NEC, is going to be, you know, if you hired a contractor to come in and do some work, or your accountant, a plumber. Those are the kind of things and businesses that your going to do 1099-NECs for. 1099-Miscellaneous are going to be more for attorneys and rents and things along those lines.”
Natalie explained that there have been no changes made to W2s for 2020, and that the reporting deadlines have remained the same.
“There are no changes for the filing deadlines. All W2s and 1099s are due at the end of January, but the end of January falls on a Sunday, I believe, so this year it’s Monday, February first. So it’s only pushed back one day.”
Due to the pandemic, many businesses also received the Paycheck Protection Program loan, or PPP in 2020, and then applied for loan forgiveness. Natalie explained that the loan forgiveness received is not taxable. Any money received by the employer, through the PPP program, as long as follow-up paperwork was filed timely, is not considered taxable income.
Natalie also went on to describe recent changes coming out of Congress that reversed a previous IRS ruling on expenses incurred while obtaining the PPP loan.
“The new Coronavirus Relief Bill reversed the IRS mandate saying that you couldn’t deduct the expenses related to your PPP loan, so one really nice thing for businesses now is that the businesses that received a PPP loan can now deduct those expenses that were related to their loan.”
Some local businesses might also be able to take advantage of the Employee Retention Credit. Small businesses who saw a decline of at least 20% in revenue, in any comparative quarter between 2019 and 2020, could be eligible for a credit worth up to $5,000 or 50% of their employees pay.
With all the changes, business owners are cautioned to get their information from a qualified source. Natalie suggests going directly to the IRS’ website for information, or looking for sources who cite references, or whose information is consistent among other reputable sources.
