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APA Acts on State Use of Form 1099-NEC

BY: Alice P. Jacobsohn, Esq. | 11/17/20

The APA is pursuing two approaches to state filing of the new IRS Form 1099-NEC, Nonemployee Compensation: (1) request that the IRS include the form in the Combined Federal/State Filing (CF/SF) Program and (2) ask states about their plans for use of the form.

The CF/SF Program

During a recent monthly IRS payroll industry call, the IRS stated that the Form 1099-NEC would not be included in the CF/SF Program. The APA asked the IRS to reconsider use of the CF/SF Program for 2021 filing of Form 1099-NEC beginning in early 2022.

In response to APA, IRS SBSE Commissioner Eric C. Hylton said, “We are pursuing the necessary system changes for inclusion of the Form 1099-NEC into the CF/SF Program; however, due to several competing programming priorities, we cannot commit to a timeframe for implementation. This request will be prioritized with other competing information technology requests and will be implemented as resources permit.”

The CF/SF Program allows organizations to file 1099 forms just one time with the IRS. The program forwards original and corrected information returns filed electronically through the Filing Information Returns Electronically (FIRE) System to participating states without charge. “For employers, the use of one set of forms for filing at the federal and state levels is a significant reduction in administrative costs,” APA said.

State Plans

Many states have not announced changes to accommodate Form 1099-NEC filing, and it is likely too late to adopt a new direct filing program for 2020. The APA asked states to consider whether the state will use the form, design a separate state form, only require filing of the form based on certain thresholds, establish the same filing dates as the IRS, and follow the filing instructions found in IRS Publication 1220, Specifications for Electronic Filing of Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G.

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Alice P. Jacobsohn, Esq., is Director of Government Relations for APA.