Deadline for filing 2023 Forms 1099 is near but beware of important changes

Executive Summary:

As the Jan. 31 deadline for filing IRS Forms 1099 rapidly approaches, filers are reminded of several small but important changes that have been published in the last few weeks that might affect your ability to file timely and may necessitate changes to your systems and processes. Specifically:

• In January 2024, the IRS published a revised version of the 2023 Form 1099-NEC, Nonemployee Compensation, which is now a continuous use form, so make sure that you are using the latest version of the form.
• In November 2023, the IRS published new Form 15397, which must now be faxed to the IRS to request additional time to furnish recipient copies of Forms 1099. An extension of time to file 1099s can still be requested by filing Form 8809 but Form 15397 must be faxed as well to extend the time for furnishing recipient copies to avoid penalties.
• Starting Jan. 1, 2024, filers of 10 or more Forms 1099 must file the forms electronically and may be subject to penalties if paper forms are filed unless a waiver is requested.
• To file 1099 Forms electronically this year, filers must request a new IR-TCC code from the IRS, which can take up to 45 days to obtain. Old TCC codes issued prior to September 2023 are no longer valid, so filers should plan accordingly and may need to outsource the filing of forms. See prior article for details.
• In December 2023, the IRS announced a one-year delay in implementation of the lower $600 filing threshold for third party settlement agents, including payment processors, ride share platforms, and others to file forms 1099-K. Instead, the filing threshold remains at $20,000 and 200 transactions for 2023 returns which means that filers may need to revise systems and processes to properly flag 1099-K reportable payments for 2023 and avoid over reporting. See prior article for details.

Additional details on new requirements appears below.

Deadline for filing 2023 Forms 1099 is near but beware of important changes

IRS releases revised final continuous use Form 1099-NEC

In January 2024, the IRS published a revised version of the 2023 Form 1099-NEC. Form 1099-NEC is used for reporting compensation (such as fees, commissions, and other payments) made to U.S. persons who are not the filer’s employees. The January 2024 version of the form incorporates several changes from the previous draft 1099-NEC released in September 2023 and follows the IRS announcement to move the Form 1099-NEC to a continuous use basis, instead of single year forms updated each year.

Key changes are the following:

1. The “2nd TIN Not” field which was removed from the September 2023 draft at the bottom of the form was added back to the form
2. The tax year field was changed from “20__” where filers only needed to enter the last 2 digits of the year to just a blank line “____”

Additionally, the instructional note/preamble that is attached to the official form was updated to clarify that filers of 10 or more information returns are now required to file them electronically.

Companies that are filing Forms 1099-NEC in house should build in sufficient lead time and budget to address these changes to Form 1099-NEC. There are potential system errors that may arise for taxpayers/filers if the above changes are not made prior to preparing the 2023 forms 1099-NEC. Filers using third parties to prepare and file their Forms 1099-NEC should also confirm that their software vendors have updated their systems for the latest version of the form published this month.

IRS publishes new Form 15397 for requesting extensions for recipient copies

The IRS recently published new Form 15397 in November 2023 which should now be used to request an extension of time to furnish recipient copies of information returns including forms 1099-NEC to each respective recipient. Filing form 15397 will extend the time to furnish recipient copies of Form 1099 to recipients by 30 days.

The deadline for furnishing recipient copies of 2023 Forms 1099-NEC to recipients is Jan. 31, 2024, while the deadline for furnishing recipient copies of Forms 1099-B, and 1099-S, and 1099-MISC (if amounts are reported in boxes 8 or 10) is Feb. 15, 2024.

If Form 15397 is completed correctly and signed, and successfully transmitted to the IRS, the extended due date for furnishing the 2023 Forms 1099-NEC Recipient copies will be March 1, 2024, and the extended due date for filing Forms 1099-NISC, 1099-B, and 1099-S will be March 15, 2024. The Form 15397 must be faxed to the IRS on or before January 31 each year at:

Internal Revenue Service Technical Services Operation

Attn: Extension of Time Coordinator

Fax: 877-477-0572 (International: 304-579-4105)

Please contact us if you have questions regarding your 1099 filing obligations and the impact of the changes discussed.