Articles

It’s Time for Business to Begin Tax Reporting for 2020 by Lewis Taub, CPA

View Lewis's Profile
Posted on January 11, 2021 by Lewis Taub

In the rush to put 2020 in the rearview mirror and welcome in the promises of a New Year, employers should remember that there are some critical tax-reporting deadlines they must prepare to meet in the next few weeks.

For example, businesses have until Feb. 1, 2021, to file Forms W-2, Wage and Tax Statements, and Forms W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration (SSA). This is also the deadline for employers to furnish W-2s to employees.

As a general rule, you must file these forms for each employee you pay and withhold income, Social Security or Medicare taxes, as well as any individual you paid $600 or more in wages during the year and did not withhold income or payroll tax. Automatic extensions of time to file are not available, however, the IRS may grant a filing extension request under certain, specific circumstances, such as a death or a natural disaster.

The February 1 deadline also applies to IRS Forms 1099-MISC, Miscellaneous Income, and the revived Form 1099-NEC, Nonemployment Compensation. Beginning with the 2020 tax year, businesses must separately report compensation totaling $600 or more paid to non-employee independent contractors and outside consultants on Form 1099-NEC rather than including it on 1099-MISC, which should be limited to payments of rent, royalties, and healthcare expenses.

To begin these filing responsibilities, employers should review, verify and update the information they have on file for all persons to whom they paid compensation in 2020, including employees, independent contractors, gig workers and accounting and legal advisors. This will entail confirming payees’ names, addresses and Social Security and/or Taxpayer ID numbers and ordering additional paper forms, as needed.

About the Author: Lewis Taub, CPA, is a director of Tax Services with Berkowitz Pollack Brant Advisors + CPAs, where he works with entrepreneurial business, multinational and multi-state corporations on tax planning and compliance strategies, including those related to mergers and acquisitions, basis issues and debt restructuring. He can be reached at the CPA firm’s New York City office (646) 213-7600 or info@bpbcpa.com.