Use the Tax Off-Season to Update Your 1099 Filing Know-How

Plus: Check out the new look for the age-old 1040

Proposed regulation changes are underway that will change how you file tax information forms—such as those in the 1099 series—beginning next year.

Summer may seem like down time for tax preparers and tax compliance pros, but this is high season for continuing education. One way to stay on top the latest rule changes and trends is to take an Eli Financial online course—on anything from what’s new in W-2s to how to revise charitable planning gifts and navigate the new world of fringe-benefit planning after tax reform.

It’s important to routinely examine where your tax compliance know-how could use an upgrade. For instance, most tax pros are gearing up for the coming changes to the 1099.

New Way to Count 1099s Electronic Threshold

Currently, persons who issue information returns like 1099s and W-2s have to file those electronically if they hand out more than 250. But a newly-proposed regulation, Forbes notes, would count the 250-threshold on an aggregate basis:

“Section 6011(e) … provides that the regulations shall not require a person to use magnetic media (that is, file electronically) unless that person is required to file at least 250 returns during the calendar year, and, when considering the obligation, the secretary should consider the costs of such requirement,” Forbes explains, adding that under 26 C.F.R. § 301-6011-2—there is no aggregation of returns.

Newly-proposed regulations, issued in late May by the Internal Revenue Service (IRS), “would require that all information returns, regardless of type, be taken into account to determine whether a person meets the 250-return threshold and, therefore, must file the information returns electronically.”

In proposing the change, the IRS noted that the original rule was made when electronic filing was relatively uncommon, but since then “concerns regarding taxpayer burden and cost associated with electronic filing have been significantly mitigated.”

In 2016, 98.5 percent of all returns were filed electronically, the IRS added.

A Shorter, More Complex Form 1040

The 2017 tax reform has introduced the biggest change to America’s most popular tax form in years. The new form is smaller and is an amalgamation of three versions of the previous 1040: the 1040EZ, 1040A, and the plain old 1040. For filers and preparers, there is both good and bad news.

“The old form was two pages long with 78 line items. The new form is a half-page long with 21 line items,” notes Student Loan Hero. “But the fact that the form is shorter doesn’t mean you should expect to finish your taxes more quickly. In many cases, you’ll have to fill out one or more of six worksheets to complete your return accurately.”

Also changed are how deductions are claimed. The new process is “less intuitive,” according to Student Loan Hero, and filers with additional part-time jobs will also have to complete additional worksheets

The New York Times compared the two forms side-by-side and agreed with both the size reduction and the increase in complexity.

“Smaller is not necessarily simpler,” the paper said. “The new form omits a variety of popular deductions, including those for student loan interest and teaching supplies, forcing taxpayers to search for them — and tally them up — on one of six accompanying worksheets.”

Many industry watchers noted that any changes to actual forms were of little use unless the tax code itself is simplified.

Taxpayers and their accountants “are probably going to have a lot more work to do in 2019,” opined Inc.. Good news for you.

Jeff Schmerker

Jeff has extensive professional experience writing on a variety of topics, from pharmaceutical research to environmental history. He has published more than a half-dozen books, and he has worked as a newspaper reporter, magazine editor and restaurant reviewer. He lives in Missoula, Montana with his wife and son.

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