Filing Annual Wage and Tax Reports for 2020 Payroll Taxes

Annual Tax Reports for Employees and Non-Employees

One of your duties as an employer is to provide reports to employees and independent contractors showing their income from the tax year.

Important Form Changes for 2020

Use Form W-2 as you have in the past to report payments to employees you made during 2020.

Use Form 1099-NEC beginning in 2020 and beyond for payments to non-employees, including independent contractors.

Don't use Form 1099-MISC beginning in 2020 for payments to non-employees. Use this form to report payments to others.

These reports are due to employees and independent contractors by the end of January the following year. Thus, wages and payments for the 2020 calendar year (Jan. 1, 2020–Dec. 31, 2020), are due February 1, 2021.

You must also file copies of these reports, along with summary reports, to the Social Security Administration (SSA) for W-2s and to the IRS for 1099-NEC forms, for verification purposes by February 1, 2021 (March 31, 2021, if you file electronically).

If any of these filing dates falls on a weekend or national holiday, the filings are due the first regular business day thereafter. For example, if Jan. 31 falls on a Saturday, the due date would be Monday, Feb. 2. The dates shown below are for the current (2020) tax year.

Provide Copies of Form W-2 to Employees by February 1, 2021

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W-2 forms must be provided to employees by February 1, 2020, for the calendar year 2020 taxes. You must submit all tax year 2020 W-2 forms, along with a transmittal on Form W-3, to the Social Security Administration (SSA) by this date.

If you file W-2 forms with Social Security by using their online system, you don't have to include the W-3 transmittal form.

Provide Copies of 1099-NEC) Forms to Non-Employees by February 1, 2021

You must prepare and file Form 1099-NEC for independent contractors and businesses you pay.

Before you can prepare and send a 1099-NEC to an independent contractor, you'll need to get a W-9 form from that person to verify their taxpayer ID.

Next, send a 1099-NEC to any non-employee to whom you've paid $600 or more during the year. Most non-employees must receive one, but there are some exceptions.

Read this article explaining who must receive Form 1099-NEC if you aren't sure about who should receive the report.

File Form 1096 with the IRS (along with 1099s) by February 1, 2021

Prepare and submit Form 1096 (Annual Summary and Transmittal of Information Returns) to the IRS, along with copies of 1099-NEC forms you sent to independent contractors and businesses you paid.

You must complete a 1096 transmittal form for each different type of 1099 form you prepare ​if you're submitting these forms by mail. If you file electronically, you don't have to submit form 1096.

File Form W-3 with Social Security (With W-2s) by February 1, 2021.

Form W-3 is a transmittal form, which summarizes the information on all of the W-2 forms you're submitting to the Social Security Administration. The W-3 form must be sent if you're submitting it by mail. The transmittal forms, along with all of your employee W-2 forms, are due to the Social Security Administration by February 1, 2021, for the 2020 tax year.

You may also be able to file these forms online using the Social Security Administration's Business Services Online portal.

If you're submitting W-2 forms online, you don't need to include a W-3 transmittal form.

How to Request an Extension of Time to File W-2s or 1099-NEC Forms

If you think you're going to have to file late, you may request a 30-day extension of time to file W-2s with the SSA and 1099-NEC forms with the IRS. Use Form 8809 to file an extension application by the due date of the form.

Extensions are not granted automatically, and you will need to provide a detailed explanation of the reason for the extension. The IRS says it will only grant the extension in "extraordinary circumstances or catastrophe." The circumstances are limited to those affecting the operation of the business:

  • A catastrophic event in a Presidentially Declared Disaster Area
  • Death, serious illness, or unavoidable absence of the person responsible for filing the returns
  • Fire, casualty, or natural disaster, or
  • The business was in its first year of operation

Filing an application for an extension may help you avoid fines and penalties for late filing of W-2 and 1099-MISC forms.

Extending the time for filing W-2 and 1099-NEC forms doesn't extend the due date for furnishing statements to recipients.

Employee vs. Independent Contractor: What's the Difference?

It's important to be sure that you are paying people correctly for their type of work and to use the correct form to report wages and payments.

The difference between whether someone receives a W-2 or a 1099-MISC to report income depends on whether the person is an employee or an independent contractor.

Generally, people are considered your employees if you have control over the work they do, based on common law factors or behavioral, financial control and the type of relationship. Independent contractors generally do not meet these specifications.

The IRS assumes that a worker is an employee unless it can be proved that the person is an independent contractor.