January 9, 2017

Big Changes Ahead for 2017 W-2 and 1099 Form Due Dates

If you pay employees and/or independent contractors in your business; or, your company has in-house employees, you are already aware of the filing requirements to report the wages and payments made to that taxpayer.   You should be aware of the big changes to the due dates for the 2016 tax year forms.

As recently as the 2015 tax year (2016 calendar year), there were two due dates for the 1099 and W-2 forms.  The first due date was January 31, when employers were required to provide the taxpayer with a copy of their W-2 or 1099.  The employers then had until February 28 to file the government copy of these forms with the IRS and/or Social Security Administration (SSA).  The benefit to the delayed filing with the government is employers would be able to make changes to incorrect information before it was filed, thereby reducing the need to file amended or corrected returns.

Unfortunately, the downside to the delayed filing with the government created the opportunity for identity thieves to file a fraudulent return to claim a refund. The IRS would not have been able to confirm the information because the employer may not yet have reported the taxpayer’s earnings.  With identity theft cases at their highest levels ever, the IRS is actively working to stay ahead of the game in an effort to prevent the issuing of fraudulent refunds and to protect taxpayers from identity theft.  One of the steps being taken is to change the due date for employers to file the government copies of these returns.

Beginning with the 2016 tax year (forms that are due in 2017), the employers’ copy is now due January 31 – the same date as the copy to the employee.  This will allow the IRS to match earnings on a filed tax return with those earnings that were reported to them by the taxpayer’s employer.

We recommend employers review basic information with their employees or contractors now, in order to expedite the process of preparing and issuing W-2s and 1099s.  We also encourage you to review a draft of your tax forms with the taxpayer before you file.

You may be wondering, “What if I can’t file the forms by January 31?”  The penalties for filing these forms late have a tiered structure that depends on how many days past the deadline the forms are filed.  For late forms filed within the first 30 days after the deadline, the penalty is $50 per return.  If you file after 30 days but before August 1, the penalty is $100 per return.  As you can see, the penalties can add up quickly.

Our advisors at Maddox Thomson & Associates stand ready to answer your questions and guide you through these changes.