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On June 23rd the Electronic Tax Administration Advisory Committee (ETAAC) released its annual report to Congress, featuring 10 recommendations the IRS should implement. Among those recommendations is a new impetus for the IRS to further leverage 1099 information returns to reduce the annual tax gap (the difference between what the IRS is owed and what it takes in each year).

On May 5th the Labor Department killed the prior administration's attempt to make it easier to classify some workers as 1099 reportable contractors. This means existing rules under the 1938 Fair Labor Standards Act will continue to be the standard in terms of determining whether a worker should be classified as a 1099 reportable independent contractor.

The IRS issued a new report (2021-40-030) putting your 1099 backup withholding efforts on notice. The report found that, due to a lack of adequate processes, billions of dollars in underreported 1099 tax by employers were not addressed and taxpayers avoided payment of billions of dollars in backup withholding.

On Thursday, April 29th the U.S. Labor Secretary threw down a new gauntlet, putting businesses on notice that quite a few 1099 reportable "gig workers" should be classified as W-2 reportable "employees" who deserve work benefits.

Amidst unprecedented changes involving 1099/1042-S reporting and a dramatic increase in associated due diligence requirements under the law the IRS is about to get a massive enforcement boost. On April 27, 2021 it was announced that the current Administration is seeking a staggering $80 billion increase in the IRS enforcement budget.

The 1099/1042-S filing season continues and there will continue to be big changes in 2021 that Accounts Payable/Tax departments and CPA's will need to remain targeted upon in terms of performing their due diligence.

Last month the National Taxpayer Advocate issued its latest report. If you are in Accounts Payable, Tax, or are an independent CPA representing business clients then there were several important items revealed by the report. Perhaps the most important is that the IRS has essentially abdicated its responsibility to provide even a modicum of assistance to 1099 filers struggling to understand the blizzard of changes made in the law over the past few years.

Let's go to the report:

Following up on last year's record levels of enforcement collection the IRS is at it again. On January 5, 2021 the IRS announced (via IR-2021-03) that it had once again surpassed the $50 billion level in enforcement revenue collection. This time coming in at $51.1 billion in enforcement revenue collected during 2020.

A San Francisco Superior Court Judge has just ordered Uber and Lyft to stop classifying its drivers as 1099 independent contractors. This ruling further upholds California's sweeping Assembly Bill 5 employment classification set of rules signed into law by Governor Gavin Newsom in September 2019.

In March of 2020 the IRS announced that certain taxpayers generally have until July 15, 2020, to file and pay federal income taxes originally due on April 15. On, April 14, 2020 the IRS extended this relief to additional returns, tax payments and other actions. As a result, the extensions generally now apply to all taxpayers that have a filing or payment deadline falling on or after April 1, 2020, and before July 15, 2020. The extensions apply to many forms and tax payments made by tax-exempt organizations, including: