IRS Makes Major Changes to Form 1099 Filing, Reporting Rules

Filing and reporting rules for Forms 1099-MISC, Miscellanous Income, and 1099-NEC, Nonemployee Compensation, are changing in the coming year, and employers should be aware of the new requirements, a payroll practitioner said May 17.

Jim Medlock, payroll compliance educator at Medlock and Associates, said that upcoming changes include modifying the electronic filing threshold, replacing the Internal Revenue Service’s Filing Information Returns Electronically system, and adding new states to the IRS’s Combined Federal/State Filing Program.

Electronic Filing Threshold

Beginning in 2024 for information returns filed for tax year 2023, including Forms 1099-MISC and 1099-NEC, employers will have to file electronically if they file at least 10 information returns in a year, Medlock said. Currently, employers do not have to file electronically unless they file at least 250 returns in a year.

“We had been waiting for more than a year and a half on proposed regulations in which the IRS was going to drop the electronic filing threshold under the Taxpayer First Act,” he said. “From 250, they were going to go to 50 and then to 10. But because it took a year and a half to get those proposed regulations finalized, they just went from 250 to 10.”

Many employers will have to file electronically because the filing threshold includes all information returns in the aggregate, he warned.

“It’s not 10 of a specific form,” he said. “It’s an aggregate of all the information returns filed under an Employer Identification Number. So, if you have Forms W-2, Forms 1099-MISC, 1099-NEC, 1099-R, or whatever information returns an employer may be filing, if an employer has over 10 returns they will have to file electronically.”

Replacing FIRE With IRIS

When employers file electronically, they should consider registering for the Information Return Intake System, the IRS’s new online system for uploading and filing Forms 1099, he suggested. IRIS will replace IRS’s FIRE system, which is being phased out.

To register, employers must apply for a Transmitter Control Code, he said. Two responsible officers for the employer are required to complete the application.

Even if an employer has been using FIRE, the employer will still have to apply for a TCC to use IRIS, he added.

Once employers are registered with IRIS, they may manually insert Form 1099 information or upload a file with all the data for the forms, Medlock said.

“There’s two different ways to use IRIS,” he said. “We can either enter Form 1099 information directly or we can upload files. IRIS provides a CSV format that we can download and use to put the information into the IRIS system. This will allow us to print the forms to go to the recipients as well as file the forms electronically with the IRS.”

However, if an employer needs to make a correction to Forms 1099 filed through FIRE, the employer will not be able to make corrections using IRIS, he warned. IRIS only allows corrections for information returns that were originally filed through IRIS.

Combined Federal/State Filing Program

The IRS’s CF/SF Program, which is available through both FIRE and IRIS, electronically forwards original and corrected Forms 1099 to participating states, Medlock said.

“The Combined Federal/State Filing Program is meant to ‘simplify’ the filing process,” he said.

According to IRS Publication 1220, Specifications for Electronic Filing of Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G, roughly 30 states participate in the program, and the District of Columbia and Pennsylvania will start participating in 2024 for tax year 2023 forms, he said. However, three of those states, Arizona, North Carolina, and North Dakota, have said that they actually do not participate.

“These states say they are not part of the Combined Federal/State Filing Program,” he explained. “These states say instead that you have to file directly with them. There are a couple of other states are a part of the program, but employers have to notify them that we are using the program. So, it’s really important if you want to use the Combined Federal/State Filing Program to make sure that you know which states have what requirements.”