The deadlines changed in the Protecting Americans from Tax Hikes (PATH) Act of 2015 and are effective for the tax year 2016 (filed in 2017) in the next filing season. But many employers either are not aware of these deadlines or are unprepared to meet them, according to experts interviewed by Tax Notes Today. Small businesses, especially those that do not use outside services or have limited resources, are considered likely to be unaware of the deadline change or unable to devote the resources required to change their processing.
In 2017, both paper and electronic tax year 2016 Forms W-2, and W-3 and those 1099s that include nonemployee compensation in Box 7, must be filed by Jan. 31, 2017. Forms 1099 that do not include an entry in Box 7 will still be due by Feb. 28 (but if filed electronically, by Mar. 31). Where you file them remains unchanged: 1099s at the IRS; W-2s and the W-3 at the SSA. All W-2s and 1099s must be mailed to payees by Jan. 31, 2017.
The accelerated deadlines are an attempt to reduce identity theft and false refund claims; by receiving the information earlier, the IRS may be able to match them against income tax returns as they are filed and identify those that are fraudulent. Many states have changed their filing deadlines for the same reasons.
If you are responsible for 1099 filings, decide whether you want to file all 1099s by Jan. 31 or only those that have non-employee compensation in Box 7. Regardless of when you decide to file the two categories of 1099s (Box 7 compensation v. no Box 7 compensation) payroll and tax experts interviewed by Tax Notes Today say that most businesses should start working on the 2017 filings 1 to 2 months earlier than in previous years.