This time of year means more than just preparing to provide employees with W-2s. Many payroll departments get hit with the double whammy of also having to prepare Forms 1099-MISC for their independent contractors.
Bad news: The 1099-MISC process this year promises to be more complicated than in years past. That's because the IRS is rolling out a brand-new form, Form 1099-NEC, beginning with 2020 payments to independent contractors. Warning: The IRS isn't entirely ditching Form 1099-MISC, which means you will have two different sets of 1099 forms to file.
Worse news: Employers are facing intense new scrutiny of their 1099s. That's because one of the primary contributors to the tax gap – the difference between taxes owed and taxes paid – is increasingly due to underreporting by independent contractors.
Even worse news: A new 2019 law quickly lowers the automatic e-filing threshold from 250 forms to 10 forms.
Worst news of all: Forms filed in the wrong medium (even correct forms!) can trigger millions of dollars in tax penalties – and unwanted attention on your department (and you!).