2021-3: California 1099-NEC filing requirements - Spidell

2021-3: California 1099-NEC filing requirements

The IRS will not be sending copies of the new Form 1099-NEC, Nonemployee Compensation, to California or any other state. (The IRS will continue to send all other Forms 1099 to the states.) As a result, businesses must send copies of Form 1099-NEC directly to the FTB, even if a copy was filed with the IRS. This applies only to the Form 1099-NEC. You do not need to send copies of any other Form 1099 to the FTB.

Businesses must send the FTB copies of the federal Forms 1099-NEC (it does not have to be the red copy), along with a copy of the federal Form 1096, Annual Summary and Transmittal of U.S. Information Returns.

Here are answers to common questions we have been asked.

  1. Must copies of other 1099s be sent to the FTB?
    A. No, the IRS will continue to forward other Form 1099 information to the FTB.
  2. Do I send a copy of federal Form 1096?
    A. Yes, you can use either the red Form 1096 or a black and white copy.
  3. Do I send the FTB a copy of Form 1099-NEC if the payment was made to a nonresident?
    A. Yes, because if the nonresident is performing services for a California business, the income is taxable to California.
  4. Must I file electronically?
    A. You may file up to 249 paper returns with the FTB. If filing 250 or more returns, you must file electronically using Secure Web Internet File Transfer (SWIFT).
  5. Where do I mail the forms?
    A. Mail the forms to:
    Franchise Tax Board
    P.O. Box 942840
    Sacramento, CA 94240-6090
  6. When is the due date to file?
    A. For paper filed returns, the due date is February 28, 2021. For electronic copies, the due date is March 31, 2021. You can request an extension to file by submitting Form FTB 6274A, Request for Extension to File Information Returns.
  7. Will the FTB abate penalties for failure to file the Forms 1099-NEC, or late filings?
    A. According to the FTB, because this is a new requirement to report the information directly to the FTB, for the first year of implementation, the FTB will make a pre-penalty determination of reasonable cause for any failure to timely file a 2020 tax year Form 1099-NEC with the FTB. This is based on the FTB’s determination that a failure to timely file Form 1099-NEC directly with the FTB for the first year is deemed to meet the reasonable cause exception in the statute.

For the most current information on what you need to know this filing season, attend Spidell’s 2020/2021 Federal and California Tax Update webinar. Click here and register today.

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