On August 3, 2018, the IRS finalized Treasury Regulation Section 1.6081-8 under Section 1.6081-8, impacting filing extensions for Forms 1099-MISC reporting nonemployee compensation and Forms W-2, with some exceptions.
Background
According to the IRS, this change is due to identity thieves filing fraudulent US tax returns early in the season, prior to the extended deadline when payers submit payment data.
To mitigate this problem, the IRS will now require payers to report individual compensation information earlier in the filing season, on January 31. It’ll also no longer grant an automatic 30-day extension to filers of Forms 1099-MISC, who are reporting nonemployee compensation (box seven of the 2018 form), and Forms W-2 (except for W-2G).
At this time, the IRS has limited the change under Treasury Regulation Section 1.6081-8 to only the above information return reports because they present the greatest risk for victims of identity theft. Additional types of information reporting may be subject to extension restrictions in the future.
Recent Changes
In 2016, the IRS moved the Form 1099-MISC IRS copy filing deadline for forms reporting nonemployee compensation from February 28—or March 31 if filed electronically—to January 31. Unlike past years, the recipient statement and IRS filing were both due on January 31.
This eliminated the window during which filers used to receive feedback on reporting errors from recipients and format the e-file for the IRS. It also created confusion among filers of Forms 1099-MISC because all other types of payments reported on the Form 1099 MISC remained due on the traditional IRS e-filing deadline of March 31. This was challenging because filers found it difficult to bifurcate the filing process and data.
To accommodate for this change, most filers submitted the automatic extension request specific to Form 1099-MISC for nonemployee compensation using Form 8809.
Impact on Filers
This IRS update will force filers to prepare filing data for most compensation payments very early in the year. While extensions will still be available, filers must meet specific criteria and certify those criteria under penalties of perjury on the updated Form 8809.
Justifiable reasons for needing an extension include the following:
- Catastrophic event in a federally declared disaster area
- Fire, casualty, or natural disaster
- Death or serious illness of the individual responsible for filing
The IRS warns that any Forms 1099-MISC not filed by January 31 will be subject to the $270 per-form penalty, and filers will receive automated notices shortly after filing.
We’re Here to Help
For more information on how this update could affect you and your business, contact your Moss Adams professional. You can also reach out to:
Erin Fennimore
Information Reporting and Withholding Director
(415) 677-8358 | erin.fennimore@mossadams.com
Jill Dymtrow
Information Reporting and Withholding Director
(310) 295-3240 | jill.dymtrow@mossadams.com