Tax Tip of the Week- Urgent 1099 Filing Updates You Should Know About

"Self-discipline is self-caring."
                        - M. Scott Peck

With the tax season just around the corner, I wanted to remind everyone of the new 1099 requirement effective for the 2023 Tax Year.  In the past, the IRS only required electronic filing of 1099s if filing over 250 returns.  They have reduced this amount to 10 returns and are combining all tax forms to get this number, including W-2's.  Our office has obtained the Transmitter Control Code (TCC) and we are ready to assist all of our clients with this process.

     - Belinda Stickle

The Internal Revenue Service (IRS) regularly releases updates to its publications to provide clarity, modifications, and necessary changes that taxpayers, businesses, and professionals should be aware of. The IRS Publication 1220 has some crucial modifications for the Tax Year 2023. Let’s dive into these new 1099 filing changes and understand their implications:

Introduction of the IRIS Taxpayer Portal

The IRS launched a brand-new platform called the Information Returns Intake System (IRIS) Taxpayer Portal on January 23, 2023 for 1099 filing.

The IRIS platform offers a comprehensive solution for users to electronically file information returns and automatic extensions of time. The system provides a seamless experience where users can create, edit, view, upload forms, and even print recipient copies, all under one roof. This should streamline the Form 1099 filing process for many users.

One significant aspect to note is that the IRIS system will have its own Transmitter Control Code (TCC). Existing TCCs associated with the FIRE system are incompatible with IRIS. To avoid complications, users should ensure they don’t file copies of forms submitted in the FIRE system in IRIS to avoid duplications. You can learn more about IRIS 1099 filing on the official IRIS webpage.

E-filing Threshold Adjustments

On February 21, 2023, the IRS and the Department of the Treasury introduced final regulations that effectively reduced the threshold for electronic filing (e-file) of returns and other documents.

Beginning in January 2024 (for the Tax Year 2023), any filer submitting 10 or more information returns during a calendar year is mandated to e-file those returns. Additionally, if the original return was required to be submitted electronically, any corrected information returns also must be e-filed.

However, these corrected returns won’t count towards the total when determining the need to e-file.

The prior threshold for the Tax Year 2022 stood at 250 returns. Additional details on these regulations can be found on the IRS and Treasury’s respective web pages on e-filing and the FIRE system.

Important Note: This updated e-filing form count threshold is for all filing types, not just 1099 filing.
 
Impact on Small Businesses and Freelancers

Given the significant reduction in the e-filing threshold from 250 returns to just 10, smaller businesses and freelancers may feel the impact the most.

Many who previously relied on paper filing due to the higher threshold may now need to adapt to the electronic system. It’s essential for these entities to familiarize themselves with the e-filing process, explore available platforms, and potentially seek guidance to ensure accurate and timely submissions.

The introduction of the IRIS system, as mentioned earlier, could serve as a beneficial tool for these groups, making the transition smoother.

Additions to Part A. Sec. 5 – Additional Resources

The IRS has added the Information Returns Intake System (IRIS) and the Publication 5717 (IRIS Taxpayer Portal User Guide) for enhanced guidance on 1099 filing.

Expansion of the Combined Federal/State Filing Program

The Combined Federal/State Filing (CF/SF) Program saw the inclusion of the District of Columbia (42) and Pennsylvania (11) to its list of participating states. This change will have implications for filers from these states, making the filing process even more streamlined.

Clarifications on the Use of TCC

The IRS has provided further clarity regarding the Transmitter Control Code (TCC) usage in Part B. Sec. 1. (IRS Publication 1220).

A TCC utilized to file forms such as 1097, 1098, 1099, 3921, 3922, 5498, and W-2G has a limit. It can only be used to submit up to 1,000 files per year. If users surpass this limit, they can request an additional TCC through the IR Application.
                                                                                                  
Credit goes to Michaela Porterfield, Published September 21, 2023 through BoomTax
 
Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We also welcome and appreciate anyone who wishes to write a Tax Tip of the Week for our consideration. We may be reached in our Dayton office at 937-436-3133 or in our Xenia office at 937-372-3504. Or, visit our website.
 
This Week’s Author, Belinda Stickle

-until next week