Prepare for the upcoming (2021) tax season
Prepare for the upcoming (2021) tax season
It’s once again time to prepare for the upcoming (2021) tax season in the United States. As your company prepares for the end of its tax year and begins to prepare for its reporting obligations in early 2022, don’t forget the following two important aspects in your preparations.
Filing of 1099 informational returns
First, take time now to properly prepare for the filing of 1099 informational returns. Any business regardless of size, that pays at least $600 for services performed by someone who is not their employee must file a 1099-NEC. The deadline to file and report nonemployee compensation is 1 February 2022 which arrives much sooner than many people expect. Form 1099-NEC (the NEC standing for Non-Employee Compensation) was new for 2021 and includes what was previously reported in box 7 of Form 1099-MISC. Timely and accurate filing is important to avoid penalties. To prepare, you should obtain a Form W-9 Request for Taxpayer Identification Number and Certification from each payee to whom you made payments of at least $600 during the year. If you do not have this information on hand now, DON’T DELAY ANY LONGER. (Generally speaking, it is a matter of best practices to request and receive the Form W-9 before releasing payments otherwise you may have difficulty with the responsiveness of one-time payees who often ignore requests for W-9’s after they have already been paid).
For more information about 1099 filings and preparation contact our bookkeeping team.
Check the company’s registrations for authority
Second, conduct an internal audit of where the company is registered for authority to transact business and whether those registrations are still necessary and/or advisable. Companies register for authority to transact business in a state for several reasons, including having a physical presence in that state by either employing, warehousing, or renting space. Once registered, however, circumstances may change, and the Company neglects to surrender or withdraw its authority subjecting it to continued tax filing requirements that may no longer be necessary or beneficial for the Company. Failing to withdraw before the end of the year may create additional obligations that could have been avoided if the company withdrew or surrendered authority to transact business before the start of the new year. The registrations and filings include state income taxes (and the expenses required to prepare and file those taxes) and may also include registrations with the various secretaries of state (annual registrations etc.). By way of example, if your entity is registered in Delaware and you decide to dissolve on 1 January 2022, not only will you be responsible for the 2021 Delaware Annual Franchise Tax, but you will also be responsible for the 2022 filing before the dissolution will be accepted.
For more information about withdrawing and surrendering authority before year’s end contact our compliance specialists.
TABS Inc. provides general business administrative services to U.S.-based subsidiaries of international companies that want to do business in the United States. For more information about our services click here or contact our Business Development team.
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