E-file 1099-NEC forms from Advanced Accounting

The IRS due date for form 1099-NEC (introduced in 2020 replacing what used to be handled by form 1099-MISC) is January 31 (unlike form 1099-MISC which has different deadlines). The form is used to report nonemployee (such as an independent contractor) payments of $600 or more.   These forms can now be e-filed from Advanced Accounting.

This form can also be used to report direct sales totaling $5,000 or more of consumer products for resale anywhere other than in a permanent retail establishment. Instead, that can be "reported" informally by providing the recipient a letter with that information along with commissions, prizes, etc.  Or 1099-MISC can be used to report direct sales as well.

Historically the requirement to file electronically at the federal level has been 250 returns (forms), but proposals are pending to reduce that number.

Many states have their own requirements for reporting nonemployee income paid to residents of a given state.

States with 1099-NEC requirements

The nine states that have no state income tax do not, of course, have a 1099-NEC requirement:

Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming

Two additional states also have no 1099-NEC requirement:

Illinois and New York

As a general rule, if you withhold any state taxes from an NEC-type payment, filing in that state is required.  Many states only require a 1099-NEC state equivalent filing if there was state withholding on the NEC payment.

These states include:

Arizona

Arkansas (or if the payment exceeds $2,500)

Colorado

Georgia

Idaho

Indiana

Iowa

Kentucky

Louisiana

Maryland

Minnesota

Mississippi

Nebraska

North Carolina

Ohio

Rhode Island

South Carolina

Utah

Virginia

West Virginia

States that generally require 1099-NEC filings whether or not any state withholding was involved are listed below.  Normally the rule also is that only residents of the state providing service in that state require a state 1099-NEC equivalent, however, there are exceptions:

Alabama - has a later deadline if there was no state income tax  withheld

Delaware

California - but not required unless the state income amount is different than the federal amount

Connecticut - must file electronically if 25 or more forms

D.C. - must file electronically if 25 or more forms

Hawaii

Kansas - electronic filing is required for 51 or more forms

Oklahoma - requires a filing if the payment is greater than $750

Maine

Massachusetts

Missouri - if over $1200, unless reported elsewhere

Michigan

Montana

New Jersey - if over $1000 or state withholding; electronic filing is mandatory

North Dakota - must be filed electronically if more than 10 forms.

Oklahoma - over $750 or state withholding

Oregon - electronic filing is required if more than 10 forms

Pennsylvania

Vermont - electronic filing if more than 25 forms; forms issued to nonresidents providing services in Vermont have to be reported

Wisconsin - must be issued to nonresidents as well as residents providing services in the state

NOTE:  The above information is in flux so please check with your local state agency or tax practitioner to get the latest information

Advanced Accounting 1099 form history

The first Advanced Accounting (Adv) program to produce 1099 forms was completed by Business Tools in September 1992 and released as part of the Adv 4.0 series.

We first started to make programming changes to that option in December of 1994 to provide a "magnetic media option" for a customer in North Dakota that needed it, working also initially in Adv 4.03 (TAS 4.0) which not long thereafter was migrated to Adv 5.0  (TAS 5.0) during the first half of 1995.  We converted the program to version 5.0 in Dec. of 1996 and then to Adv version 5.1 (TAS 5.1) in 1997, along the way making changes for ever-changing IRS requirements as well to improve the functionality of the program such as adding a "review" option in 1998 and adding support for the 1096 transmittal in 2006 along with annual reviews and updates.

More recently, in 2020 we updated the program for the 1099-NEC change and in 2021 to print those to three, rather than two, per page.

2023 latest changes 

The magnetic media option that we first added in 1994 had long since fallen into disuse.  But we have now implemented an interface with our e-filing partner (Nelco Solutions) that provides the ability to file electronically not only federally but also in any state.  In the course of doing that, we have added support for:

Direct sales indicator

Federal (backup) withholding:

Multiple state income, state codes, tax ID's, and withholding amounts

Account number for the vendor if missing (since this is a required element)

Numerous other new features have been incorporated.

These new options are available via an "adjust" option that provides for on-the-fly entry that has been considerably enhanced.

The 1099-NEC adjust/change screen

When completed, the import file is uploaded to the same branded site that is used for e-filing W-2 forms (and the W-3 transmittal) and to accomplish state filings as well.

This option can be provided now to existing Adv 8 (and 9) users for 2022 e-filings and will be incorporated into the next update releases.

Why file electronically if it isn't required?

Filing electronically reduces the time and hassle associated with manually preparing these returns.  It more securely provides the information to agencies without having to put confidential taxpayer identification numbers in the mail, and the information is more quickly and accurately processed.

Further, it obviates the need to purchase any forms.  While you still have to mail the recipient a copy (printed from a provided PDF that is generated as a result of the e-filing), that is a service that can be performed by our e-filing partner.  As a result, the minimal per employee filing cost is reduced even more.

So even for users with just a few 1099-NECs, there are many reasons to file electronically even if not required.  In short, it saves time and frustration.

Adv 8 r11 includes 2023 payroll updates

Advanced Accounting 8 r11 is now available and includes 2023 payroll updates.

Payroll:

In addition to the usual federal changes and new OASDI maximum, over 60% of states that have state withholding taxes have made changes to their rates or withholding logic.

States with changes that have been updated within the latest versions of Advanced Accounting as well as retested include:

Alabama

Arizona

Arkansas

California

Colorado

Georgia

Indiana 

Lousiana

Missouri

Montana

Nebraska

New Mexico 

Oklahoma

Oregon 

Utah

Virginia

Some of the changes only involve withholding rate table changes (New Mexico).  Some solely relate to allowance increases (Alabama).

Some of the changes that needed to be made go back to 2022 (Arkansas made changes effective October 1, 2022; Louisiana made changes effective January 1, 2022, that may have not been published until much later).

Other are much more involved including the many states that have relatively complex formulas.

In retesting these states, we have also added new logic to the "calculation" option contained with the PR-B Enter Pay Info option.

In re-reviewing the withholding instructions for each of these states, some major logical changes had to be made (such as for California and to accommodate Arkansas's unusual negative adjustments included in their tax tables).

Some of the changes still relate to the fallout caused by the 2020 federal government W-4 changes. While the new federal form no longer uses the longstanding withholding allowances that we were all used to up until that time, many states still do (calling them dependent allowances in some cases) as well as in some states also providing for "personal allowances"  or in the case of California additional "estimated deduction" allowances that have different rates associated with them.  It seems as though some states are still grappling with the 2020 federal changes which have in turn caused a lot of confusion for seemingly little gain and have imposed yet more burden on businesses and taxpayers in general.

While employers are required to implement these changes as soon as practical, the overall effect is often small despite the effort it takes to maintain and update them.  As we reviewed 2023 test cases and in our testing in general, it seemed on balance that federal changes resulted in slightly lower withholding amounts, and that states tended to make changes that also reduced their withholding, which seemed somewhat surprising given rising costs in 2022.

We also noted that in several states, the highest brackets were changed to a lower percentage than in the prior year and that changes to those highest brackets in some cases made little intuitive sense.

Some new hints have been added in PR-A Enter/Change Employees for Colorado, California, and Arizona.  Arizona is another unique state where the employees elect one of seven percentages unless claiming to be exempt, which is applied to taxable wages for its state withholding.  In Colorado (going back to January of 2022 when first effective), the number of jobs needs to be entered in the state allowances field. In Arizona, the percentage multiplied by 10 needs to be entered under state allowances. In California, the number of additional allowances from estimated deductions needs to be separated and placed in the SSEx field rather than in the state allowances field. In some states, dependency credits are entered in the SSEx field.  County taxes for Indiana continue to be handled as in the past but those rates have changed for 2023.

There are indications of 2023 changes in other states other than those we have specifically reviewed thus far (including Iowa, Kentucky, Maine, Maryland, Minnesota, North Carolina, North Dakota, Rhode Island, South Carolina, Vermont, and Washington DC). We will review and provide updates as time allows and based on our users processing payroll in those states, but we did not wait any longer to put out these other updates that have now been completed.

Payroll related programs changed:

PR-B Enter Pay Info as indicated above and see below

PR-D Print payroll checks - first day next pay period issue when batch posting

PR-G Print W2s and W2 History has been enhanced to remember settings previously used when submitting an e-file.  Also when e-filing, an employee control number which consists of the year and employee number is now included for reference.  Note:  the e-filing portal is open, we qualified for the required annual testing toward the end of last year, and we have already made one e-filing for 2022.

PR-K Maintain tax tables option has been updated for federal and state rate changes along with the corresponding extensive changes to PR-B  

SY-D Enter/Chg PR/GL interface ensures that the new OASDI max is validated when updating or adding a payroll division.

Non-payroll updates:

Adv 8 r11 includes a variety of non-payroll program updates made in November and December of last year:

SY-K-C When changing many product codes from an import file, a new clone option has been added for special situations.  So when using this option the existing code is left intact.

AP-I Print Vendor General Info has been modernized and a new tab-delimited export feature added.

AR-I-A (Customer reports) Sales by Month now includes the option (as elsewhere) to use the salesperson when the invoiced was posted, which is the default, or as currently assigned when limiting to a salesperson.

IC-C-C (Product Sales/Purch Info) Top Products Sold Analysis also has the option to use the salesperson when the invoice was posted (the default) or as currently assigned when limited by a salesperson.

SO-G Post invoices now updates billings for jobs based on the invoice subtotal rather than the total that might include tax or freight (applies only to job costing)

AR-R-D Unapplied credits Report: the total of the unapplied credits generated by the report is now included.

AR-B Enter/Change Vouchers:  the check fiscal function was still being limited to five years past instead of six years past as everywhere else

 AP-M Enter Recurring (AP) Vouchers  -  building on rel. 10 enhancements and because the mouse/cursor position can inadvertently default to a different menu option than previously selected when editing a voucher in this legacy program, this option now asks whether the voucher type needs to be changed when editing an existing recurring voucher.

AP-N Generate Recurring (AP) Vouchers - building on rel. 10 enhancements, the ability to override the invoice description and invoice # (which in the past has been internally assigned by the software) in manual check/ACH situations has been added, along with a new option to limit the generation to a single vendor code (which can be used instead of or in combination with the selection code range).

For more details or to schedule an update, contact us at support@addsuminc.com or call 800-648-6258.