What the 2021 IRS 1099 changes mean for Microsoft Dynamics NAV and Business Central On-Premise

There have been some significant form changes from the IRS for 1099s for the 2021 tax year. If your company produces these forms out of Microsoft Dynamics NAV or Business Central On-Premise, it will be necessary to either apply an update, hotfix, or upgrade to Business Central online, depending on what version you are utilizing.

Microsoft has released 1099 updates for Microsoft Dynamics NAV and Business Central On-Premise. If you are on Microsoft Dynamics NAV 2017 or later or Business Central On-Premise version 17 or later, you will need to apply the applicable update or hotfix to ensure you have the latest 1099 forms.

Mainstream support for Microsoft Dynamics NAV 2016 ended in April 2021. For this reason, if you are on Microsoft Dynamics NAV 2016 or earlier and need to produce 1099s from Microsoft Dynamics NAV, you will need to upgrade to Business Central. If you are on Microsoft Dynamics NAV or earlier and do not upgrade, there will be no way to print accurate 1099-MISC, 1099-NEC, 1099-DIV, or 1099-R forms out of Microsoft Dynamics NAV. Rand Group recommends upgrading in advance of year-end to ensure you have sufficient time to successfully plan and execute the upgrade. If upgrading is not feasible within the time frame, contact Rand Group to discuss some possible workarounds.

If you are still on the April 2020 release, version 16, of Business Central On-Premise, you will need to apply any of the three newest releases in order to take the necessary hotfix and to receive support from Microsoft. It is recommended to apply the newest release, version 19, to get all the latest features and bug fixes. You may also upgrade to Business Central online to receive all the benefits of a true cloud solution such as seamless upgrades and reduced hardware costs.

Microsoft has a current promotion to assist in the transition from Microsoft Dynamics NAV and Business Central On-Premise to Business Central in the cloud. Rand Group has extensive experience supporting clients with Dynamics NAV and Business Central and would love to assist you with your upgrade process. For more information about upgrades and the current promotion, get in touch with one of our representatives today.

Starting in the 2021 tax year, Form 1099-NEC will be resized with a reduction in height in order to accommodate 3 forms on one page. 

Box 1 on Form 1099-NEC will no longer be used for reporting under section 6050R, regarding cash payments for purchase of fish for resale purposes, from an individual or corporation who is engaged in catching fish. Instead, it will reported in the new Box 11 on Form 1099-MISC. 

Payers may use either box 2 on Form 1099-NEC or box 7 on Form 1099-MISC to report any sales totaling $5,000 or more of consumer products for resales, on buy-sell, deposit-commission, or any other basis. 

The FATCHA filing requirement box will be removed from Form 1099-NEC and must be selected on Form 1099-MISC if needed. 

In addition to the changes listed above, starting for the tax year 2021, Form 1099-MISC will receive a title change from Miscellaneous Income to Miscellaneous Information.

Full information on 1099-NEC and 1099-MISC changes can be found on the IRS website: https://www.irs.gov/instructions/i1099mec.

Starting in 2022 for the 2021 tax year, there will be two new boxes on Form 1099-DIV. RICs and REITs should report any section 897 gains on the sale of United States real property interests in box 2e and box 2f.

Full information on 1099-DIV changes can be found on the IRS website:  https://www.irs.gov/instructions/i1099div/.

Starting in 2022, for the 2021 tax year, Form 1099-R will include updates due to changes to the safe harbor explanations for eligible rollover distributions.

The age required for minimum required distributions has increased from 70 and ½ to 72. This increase will be reflected in the form’s reference to required minimum distributions.

Full information on 1099-R changes can be found on the IRS website: https://www.irs.gov/instructions/i1099r/.

There are minor changes to Form 1096 for the tax year 2021. New instructions are provided on the form noting to “Send this form, with the copies of the form checked in box 6, to the IRS in a flat mailer (not folded)”.

Additionally, filing dates have been updated. The date to file Forms 1097, 1098, 1099, 3921, 3922, or W-2G has changed from March 1 to February 28, 2022. The date to file Forms 1099-NEC has changed from February 1 to January 31, 2022 and the date for file Forms 5498 has changed from June 1 to May 31, 2022.

It is important to note that currently there is a 250 return requirement. This means that if you are required to file 250 or more information returns of any one type, you must file electronically. This requirement applies to each type of form separately. For example, if you must file 350 Forms 1099-NEC and 80 Forms 1099-MISC, you must file Forms 1099-NEC electronically, but you are not required to file Forms 1099-MISC electronically. However, the Tax Payer Act of 2019, enacted July 1, 2019 authorized the Department of Treasury and the IRS to issue regulations that reduce the 250-return requirement to 100 for 2021 tax returns. If those regulations are issued and effective for 2021 tax returns required to be filed in 2022, the IRS will post an article explaining the changes here.

More information on 1096 changes can be found on the IRS website: https://www.irs.gov/forms-pubs/about-form-1096/.

At Rand Group we have the business acumen and application knowledge to help you achieve business success. If you have additional questions regarding the upcoming 1099 changes, contact one of our representatives today. Furthermore, if you are considering upgrading Dynamics NAV to Business Central we can provide additional insights and help guide you through the considerations involved in upgrading your system.