Here are a couple quick updates on changes to 1099 non-employee compensation reporting and delay of Michigan minimum wage increase. Please note important filing dates and related penalties:
New Form 1099 NEC, W-2s and Penalties
Form 1099 NEC (Non-Employee Compensation), rather than Form 1099 MISC, is now required to be filed with the IRS and issued to anyone that performed a service for your business. Form 1099 MISC is still needed for other payments such as rent paid.
Please note the following due dates for the most common forms:
W-3 and W-2s – February 1, 2021
Form 1099 NEC (Non-Employee Compensation) – February 1, 2021.
Form 1099 MISC and Form 1099 INT – March 1, 2021
The penalties have increased for both incorrect and late filed information returns (Form 1099 and W-2). There are two statues at issue, and for every employee or payee an employer has, there are two filing requirements, one that applies to the returns to be filed with the IRS/SSA and one that applies to the returns required to be provided to employees or other recipients of taxable compensation. Therefore, a single incorrect Form 1099 will now cost an employer $100 - $1,120 (or 10% of the amount required to be shown on the statement x 2).
Michigan Minimum Wage Rate Increase Delayed Due to COVID-19
The Michigan Department of Labor and Economic Opportunity (LEO) has announced that the minimum wage increase from $9.65 per hour to $9.87 per hour will not go into effect as planned on January 1, 2021, due to the coronavirus (COVID-19) pandemic.
Due to the Improved Workforce Opportunity Act of 2018, the minimum wage increase is prohibited until the annual unemployment rate for the preceding calendar year falls below 8.5%. The annual unemployment rate in the state as of October sits at 10.2%, and is unlikely to reach 8.5% by the end of the calendar year. As such, the minimum wage increase will likely go into effect in the following calendar year. Michigan's minimum wage will remain at $9.65 per hour, with minor wages at $8.20 per hour, tipped wages at $3.67 per hour, and training wages at $4.25 per hour for newly hired employees between 16 and 19 years of age [Michigan Department of Labor and Economic Opportunity News Release: Minimum wage increase unlikely to take effect on Jan. 1.] . (Source: Thompson Reuters; Checkpoint Daily Updates 12/16/2020)
Please do not hesitate to contact us should you have any questions. Feel free to contact one of our CPAs at (616) 642-9467 or request a complimentary accounting consultation.
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