It’s barely the middle of January and the first tax filing deadline is already upon us at the end of this month. Businesses, nonprofits, and other entities may make payments that must be reported on IRS Form 1099. In general, Form 1099 must be completed and filed for each person to whom $600 or more was paid during the year for rents, non-employee income payments, prizes and awards, and other payments defined by the IRS at https://www.irs.gov/forms-pubs/about-form-1099-misc.
Here are four tips to meet the Form 1099 Tax Filing Deadline:
- Payments are reported on either Form 1099-MISC (miscellaneous), or on the new Form 1099-NEC (non-employee compensation) that was implemented beginning with the 2020 tax year. Which form to use depends on the type of payment recipient. For more information about Forms 1099-MISC and 1099-NEC and their instructions, go to IRS.gov/Form1099MISC or IRS.gov/Form1099NEC.
- The due date for filing Form 1099 1099-MISC and 1099-NEC is January 31st for the calendar year ending December 31st. The former 30-day automated extended filing deadline was eliminated in 2016.
- Form 1099 reporting does not apply to personal payments, only payments made as part of a business, nonprofit, trusts of qualified pension or profit-sharing plans of employers. One exception to this is payments of legal fees to attorneys.
- Some payments do not have to be reported on Form 1099, although they may be taxable to the recipient. For example, in general, payments to a C or S corporation, payments of rent to real estate agents or property managers, and business travel allowances paid to employees are not reportable on Form 1099.
If you make payments as part of your business, nonprofit, trusts of qualified pension or profit-sharing plans of employers, your first tax filing deadline for 2021 could be coming up. Use these four tips to see if payments that you made in 2020 need to be reported to the IRS by January 31st. Need more details? The IRS has them for you at https://www.irs.gov/businesses/small-businesses-self-employed/am-i-required-to-file-a-form-1099-or-other-information-return.
Last week, I filled my Honda’s gas tank for the first time since July. My situation might be extreme, but overall car usage has been down since the beginning of the pandemic in March 2020. No matter how much or how little you use your personal vehicle, you could qualify for a tax deduction if you drive for business, charitable, medical, or moving purposes. How much you can deduct and how you report the expense depends on your situation.
Every year, the IRS issues the new standard mileage rates based on the average actual cost per mile to operate a vehicle. The average cost per mile is calculated to include fuel, maintenance, insurance, and depreciation. The IRS recently issued the new standard mileage rates for 2021.
Beginning on January 1, 2021, the standard mileage rates were either reduced due to lower fuel prices or stayed the same due to statutory constraints. Here are the details:
- 56 cents per mile driven for business use, down 1.5 cents from the rate for 2020
- 16 cents per mile driven for medical purposes, down 1 cent from 2020
- 14 cents per mile driven in service of charitable organizations, set by statute, and remaining unchanged from prior years
- 16 cents per mile driven by members of the Armed Forces on active duty who move pursuant to a military order and incident to a permanent change of station, down 1 cent from 2020
Even at the lower rates, the standard mileage can really add up. You also have the option of calculating the actual costs of using your vehicle instead of using the standard mileage rates. Qualified deductible vehicle expenses can total the greater of actual expenses or a standard rate.
Most people choose to use the standard rate because it’s easier and usually results in a larger deduction amount. Both expense deduction options are based on the number of miles driven during the calendar year. You must track your mileage by usage type for each vehicle no matter which method you use.
Taking vehicle deductions for qualified business, charitable, medical, or moving purposes involves a lot of tracking, but the effort can be worth it. There are apps you can put on your phone to help. Once you get your mile tracking process down, you’ll see that those deductions can add up and reduce the bottom line on your tax bill.