January 17, 2022
Candace J. Dixon
Businesses and other payers who took backup withholding from payments they made to certain payess should remember these upcoming filing deadlines.
What Is Backup Withholding?
While businesses and other payers don't usually withhold taxes from payments they report on Forms 1099 and W-2G, there are situations when they have to withhold 24% of the payment to make sure the IRS receives the tax due on the income. This is known as backup withholding. If a payer does this, they have to deposit the withholding with the IRS.
Form 945, Annual Return of Withheld Federal Income Tax
Liability for backup withholding and any other federal income tax withheld from nonpayroll payments has to be reported on Form 945, Annual Return of Withheld Federal Income Tax. The last day to file Form 945 for 2021 is Monday, January 31, 2022. If deposits were made on time and in full, the last day for filing is Thursday, February 10, 2022.
Information Returns
The information returns listed below are used to report backup withholding for 2021. They're due to the IRS on Monday, February 28, 2022, for paper filers and on Thursday, March 31, 2022 for electronic filers.
Form 1099-B, Proceeds from Broker and Barter Exchange Transactions
Form 1099-DIV, Dividends and Distributions
Form 1099-G, Certain Government Payment
Form 1099-INT, Interest Income
Form 1099-K, Payment Card and Third-Party Network Transactions
Form 1099-MISC, Miscellaneous Income
Form 1099-NEC, Nonemployee Compensation
Form 1099-OID, Original Issue Discount
Form 1099-PATR, Taxable Distributions Received from Cooperatives
Form W-2G, Certain Gambling Winnings
Payers must also furnish the information returns to the payees by the due dates on page 26 of Publication 15, General Instructions for Certain Information Returns.
Use the Same Employer Identification Number on All Forms
Information returns and Form 945 must be filed using the same employer identification number (EIN). Filing returns with inconsistent EINs may cause processing delays and penalties.
Information Return Filing Extensions
Payers can request a 30-day extension to file any of the information returns listed above by filing Form 8809, Application for Extension of Time to File Information Returns. Extensions are usually granted automatically.
Filing Due Date and Extensions for Form 1099-NEC
When the PATH Act changed the due date of Form 1099-MISC to January 31 for reporting nonemployee compensation, the IRS brought back Form 1099-NEC, Nonemployee Compensation to separate nonemployee compensation from miscellaneous payments and eliminate confusion. Businesses, payroll professionals and other payers use 1099-NEC to report nonemployee compensation (fees, commissions, prizes, and awards) of $600 or more paid to a payee.
Nonemployee compensation may be subject to backup withholding at a rate of 24% if:
A payee has not yet provided a taxpayer identification number (TIN) to the payer at the time the compensation is paid to the payee
The IRS notifies the payer that the TIN provided was incorrect.
The backup withholding must be deposited with the IRS and reported on Form 1099-NEC. Payers use Form 945, Annual Return of Withheld Federal Income Tax to report backup withholding shown on Forms 1099-NEC.
There's a different filing due date for Form 1099-NEC. It must be filed with the IRS by Monday, January 31, 2022 for both paper and electronically filed returns. Payers must also furnish Form 1099-NEC to payees by this date.
The IRS does not automatically grant extensions for Form 1099-NEC. Payers who need a 30-day extension to file Form 1099-NEC must meet one of these criteria on line 7 of Form 8809, then an additional 30-day extension may be available:
The filer suffered a catastrophic event in a federally declared disaster area that made the filer unable to resume operations or made necessary records unavailable
Fire, casualty, or natural disaster affected the operation of the filer
Death, serious illness, or unavoidable absence of the individual responsible for filing the information returns affected the operation of the file
The filer was in the first year of establishment
The filer did not receive data on a payee statement such as Schedule K-1, Form 1042-S, or the statement of sick pay required under section 31.6051-3(a)(1) in time to prepare an accurate information return.