As the calendar year closes and the new filing season approaches, employers and payers must prepare to comply with IRS information reporting requirements. The primary areas of focus at year-end include issuing Forms W-2 for employees, Forms 1099 for non-employee payments, and properly reporting fringe benefits provided to employees.
Understanding IRS rules and deadlines helps minimize compliance risk and avoid potential penalties.
Forms W-2: Reporting Employee Wages and Compensation
Form W-2, Wage and Tax Statement, is filed by employers to report wages, tips, and other compensation paid to employees as well as FICA and withheld income taxes.
New Reporting Requirements for Tips and Overtime in 2025
- No Tax on Tips: Employers and other payors must file information returns with the IRS, or SSA in the case of Form W-2, and provide statements to taxpayers showing certain cash tips received during the year and the occupation of the tip recipient.
- No Tax on Overtime: Employers and other payors must file information returns with the IRS, or SSA in the case of Form W-2, and provide statements to taxpayers showing the total amount of qualified overtime compensation paid during the year.
Fringe Benefits and Box 12 and 14
Fringe benefits are non-wage compensation or perks employees receive in addition to their regular salary. When fringe benefits are taxable, they are typically included in Box 1 wages and sometimes Box 3 and 5 on the Form W-2.
These boxes are used to separately disclose taxable fringe benefits and elective deferrals. This helps employees understand why their reported wages may be higher or lower than their cash compensation alone.
Common Examples of Fringe Benefits Reported in Box 12
- Taxable employer paid cost of group-term life over $50,000
- Adoption benefits
- Income from exercise of non-statutory stock options
Common Examples of Fringe Benefits Reported in Box 14
- Personal use of a company vehicle
- S Corporation medical benefits (health, dental, or vision insurance premiums paid on behalf of a shareholder owning more than 2% of company stock)
- Taxable moving expenses
- Employer-paid personal expenses
Forms 1099-NEC: Reporting Non-Employee Payments
When is a 1099 Required?
A payer must issue the appropriate Form 1099 when reportable payments are made in the course of a trade or business to a recipient who is not an employee, and total payments exceed $600 for the year.
Generally, payments to a corporation (including a limited liability company (LLC) that is treated as an S corporation) are not reported on a Form 1099. The exception is attorney fees which are reported on Form 1099-NEC.
Note: The reporting threshold will increase to $2,000 in 2026.
Common 1099 Forms
- Form 1099-NEC
Used to report payments made to non-employees, such as independent contractors, freelancers, and consultants, for services performed during the tax year as well as payments to attorneys. - Form 1099-MISC
Used to report miscellaneous payments such as rents, prizes, awards, and other income types when thresholds are met.
Information Needed to File a Form 1099
1. Payer (Your Business) Information
This identifies the business issuing the Form 1099.
- Legal business name
- Business address
- Employer Identification Number (EIN), or Social Security Number (SSN) for sole proprietors
- Contact name and phone number
2. Recipient (Payee) Information
This identifies the individual or business that received the payment.
- Legal name (individual or business)
- Business name (if different)
- Mailing address
- Taxpayer Identification Number (TIN), which may be a SSN, EIN or ITIN
Pro Tip: Obtain this information using Form W-9 before making payments to non-employees to avoid delays, errors, and potential IRS penalties.
Electronic Filing Threshold
You must file electronically if your business files 10 or more information returns in total (including W-2s and 1099s).
Key Due Dates for the 2025 Tax Year
Form Type | To Recipients | Paper Filing to IRS | E-Filing to IRS |
Form 1099-NEC (Nonemployee Compensation) | Feb. 2, 2026* | Feb. 2, 2026* | Feb. 2, 2026* |
Form 1099-MISC (Miscellaneous Information) | Feb. 2, 2026* | Mar. 2, 2026* | Mar. 31, 2026 |
Most Other 1099s (INT, DIV, R, K, etc.) | Feb. 2, 2026* | Mar. 2, 2026* | Mar. 31, 2026 |
*The actual date for these deadlines is January 31 or February 28/March 1, 2026, but since those dates fall on a weekend or holiday, the due date is the next business day.
In Conclusion
As year-end approaches, it’s important to understand your reporting obligations for W-2s, fringe benefits, and 1099s to avoid delays and potential penalties. If you have any questions about W-2s, fringe benefits, or 1099 reporting, please contact us to discuss your situation and how we can support you.