What You Should Know About The 2018 W-2, 1099 & 1095 Filing Season

Businesses are gearing up for a busy W-2, 1099 & 1095 filing season in the months ahead, navigating through an accelerated reporting season and getting re-acquainted with specific state and federal requirements. 

Deadlines & Timing

For 2019, the PATH (Protecting Americans from Tax Hikes) Act requires businesses to file W-2, 1099 and 1095 forms before the January 31 deadline. In previous years, the IRS has provided leniency to businesses filing 1095 (Affordable Care Act) forms, but at this time IRS has yet to announce an automatic extension. Therefore, don’t expect the IRS to extend the ACA filing deadline this year just because they have in the past. Be prepared to file your forms before the January 31 recipient deadline to remain in compliance and avoid potential fines. 

Thus far, 35 states have aligned their state deadlines with the January 31 federal deadline. Many states have already moved reporting deadlines up from February or March, with additional states expected to join the trend. The shortened timeline has put pressure on businesses and accountants to file earlier than ever before. 

January 31, 2019 Federal & Recipient Deadlines

Forms 101

There are two different reporting forms used for two types of workers: 1099s and W-2s. Independent contractors receive 1099 forms and traditional employees will receive a W-2 every year. It can often be difficult to classify workers, and costly if you make a mistake. 

A W-2 is the form employers will use to report yearly wage and withholding information. An employer needs to provide this form to employees no later than January 31, 2019. Employees will receive up to four copies of this form to report federal, state and local income and maintain a copy for their own records. By definition, an employee is anyone who performs services for an employer and the employer can control what will be done and how it will be done. This is true even when an employer gives an employee freedom of action. 

A 1099-MISC is the form businesses use to report miscellaneous income, such as income earned as a contract or freelance worker, as well as fees, royalties, commissions and rental income. If you are an employer who uses contractors or freelance workers whom you paid at least $600 during the year, you must provide them with a 1099-MISC form to report this income. An individual is considered an independent contractor if the payer has the right to control or direct only the result of the work and not how it will be done. An employer generally does not withhold federal income tax or Social Security/Medicare taxes for independent contractors. 

A 1095-C is the form employers will use to report health coverage for employees (1095-B for self-insured employers with fewer than 50 full-time employees). It is important to note that all self-insured employers, regardless of size, must report healthcare coverage information to employees and the IRS. Full-time employees are defined as those who worked an average of at least 30 hours per week or 130 service hours in a calendar month. Using this guideline, businesses may discover that even though they have less than 50 full-time employees according to other definitions, they still meet the requirements for ACA reporting.

Gathering information necessary to complete Form 1095 presents a unique challenge to companies since the form requires data typically stored in the employer’s payroll system as well as HIPAA-protected benefits information that is most often included in the employer’s human resources software. Businesses can expect additional workload in correctly combining this information from two very different regulated databases and importing the data into the 1095 form.

(Source:  AccountingToday - IRS Watch - Great Landyearlinews- November 7, 2018)