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By: David L. Marrison, Field Specialist, Farm Management, Barry Ward, Director of the OSU Income Tax Schools, and Jeff Lewis, Attorney and Program Coordinator- OSU Extension.

It is tax season! The Internal Revenue Service (IRS) expects over 140 million individual tax returns to be filed by the April 15, 2025 deadline. With tax returns set to be accepted by the IRS starting January 27, it's crucial for individuals and businesses to stay on top of important tax reporting deadlines.

One of the key requirements during this time is the proper reporting of income through 1099 forms. These forms, which report various types of non-wage income, need to be furnished to taxpayers by January 31. Additionally, copies also need to be sent to the IRS by the January 31^st deadline (with a few exceptions) to avoid penalties and ensure timely processing of tax returns.

This article will provide an overview of 1099 forms, highlighting the specifics of the 1099-NEC, 1099-MISC, and 1099-K forms. Additionally, we will share reporting deadlines, penalties for non-reporting, and provide resource links from the IRS.

What is a 1099 Information Return?

A 1099 form is an information return used by businesses, financial institutions, and other organizations to report various types of income paid to individuals who are not employees. These forms are typically issued to independent contractors, freelancers, and vendors to report payments made for services rendered, interest earned, dividends, and other income types.

These returns help ensure that individuals and entities report income correctly on their tax returns. There are over 20 different 1099 forms. The major forms which farm families may receive include:

• 1099-NEC         Non-employee compensation
• 1099-MISC       Miscellaneous income
• 1099-K             Income from third party vendors
• 1099-G             Unemployment compensation or other government programs
• 1099-INT          Interest income
• 1099-DIV          Investment dividends and distributions
• 1099-PATR       Taxable distributions from cooperatives
• 1099-S             Proceeds from real estate transactions

1099-NEC

One of the most common 1099 forms used is the 1099-NEC, which reports payments to non-employees. The form is required to be issued when compensation totaling more than $600 (per year) is paid to a nonemployee for certain services performed for your business. If the following four conditions are met, you must generally report payment for nonemployee compensation on Form 1099-NEC:

1. You made the payment to someone who is not your employee.
2. You made the payment for services for your trade or business (including government agencies and nonprofit organizations).
3. You made the payment to an individual, partnership, estate, or in some cases, a corporation.
4. You made payments to the payee of at least $600 during the year.

Examples of “nonemployee compensation” could include hiring a neighboring farmer to harvest, spray, or plant your crops or independent contractors such as crop consultants, mechanics, accountants, and veterinarians. Payment for parts or materials used to perform the service (if the supplying of the parts or materials was incidental to providing the service) is included in the amount reported as nonemployee compensation.

Reporting is needed for payments made to unincorporated businesses (ie. sole proprietorship or a LLC that has elected to be taxed as a sole proprietor or partnership) for compensation of $600 or greater. Generally, payments to a corporation, or a LLC which has elected to be taxed as a corporation, do not require a 1099-NEC to be issued. Two exceptions which should be noted are for payments of $600 or greater to an attorney or veterinarian, regardless of business entity (corporation or unincorporated), need to be reported on the Form 1099-NEC.

If you are required to file a Form 1099-NEC, you must furnish a statement to the recipient and to the IRS by January 31 of each year or the next business day, if the due date is on a weekend or holiday. For the tax reporting year of 2024, the form is due January 31, 2025.

A form 1099-NEC can be issued even if the payment is below the $600 threshold or is to a party that you are in doubt as to whether you are required to issue this informational return. There are no prohibitions or penalties for doing this.

Previously, business owners would file Form 1099-MISC to report non-employee compensation. As a historical note, the Form 1099-NEC was re-introduced in 2020. It was previously used by the IRS until 1982 when the IRS added box 7 to Form 1099-MISC and discontinued the 1099-NEC form. Now, this compensation is listed in Box 1 on the 1099-NEC.

A reminder that greater scrutiny has been given to the improper classification of an employee as an independent contractor. It is your duty to make sure that you have classified properly. For tax purposes, the IRS provides guidance on making this determination through behavior control, financial control, and the relationship of the parties. Details can be found in IRS publication 1779 located at: https://www.irs.gov/pub/irs-pdf/p1779.pdf

Form 1099-MISC

The Form 1099-MISC is used to report a variety of income payments made to others and are made during your trade or business (not personal). These include, but are not limited to:

• At least $10 in royalties (box 2)
• At least $600 in:
  • Rents (box 1)
  • Prizes and awards (box 3)
  • Medical and health care payments (box 6)
  • Crop Insurance proceeds (box 9)

Reporting is needed for payments made to unincorporated businesses (ie. sole proprietorship or a LLC that has elected to be taxed as a sole proprietor or partnership) for compensation for each reporting thresholds ($600 or greater for rents or $10 for royalties). Generally, payments to a corporation, or a LLC which has elected to be taxed as a corporation, do not require a 1099-MISC to be issued. However, there are exceptions as noted previously.

One question, we receive from farmers is “do I need to issue a 1099 to the landowners which I rent ground from?” As a farmer, if you made the payment for services for your trade or business (ie. your farm business), then you will need to issue a 1099-MISC to landowners who receive $600 or more in land rental payments (in aggregate).

The reporting deadlines for the 1099-MISC forms are a little different than the 1099-NEC. The 1099-MISC must be to the recipient by January 31 (similar to 1099-NEC) but are not due to the IRS until February 28 for paper copies or March 31 for e-filed returns.

1099-K

The 1099-K form may be a new form to some of our farm managers. Form 1099-K tracks income made from selling goods or providing services via payment apps and online marketplaces. Examples include (but are not limited to) PayPal, Venmo, Square, and Ebay. Payment card companies, payment apps, and online marketplaces are required to fill out Form 1099-K and send it to the taxpayer and to the IRS by January 31. You will receive a 1099-K if:

• If you take direct payment by credit or bank card for selling goods or providing services. If customers pay directly by credit, debit or gift card, you will receive a Form 1099-K from the payment processor or payment settlement entity, no matter how many payments received or how much they were for.
• A payment app or online marketplace is required to send you a Form 1099-K if the payments received for goods or services total over $5,000 (2024 limits). However, they can send you a Form 1099-K with lower amounts.

Please note the reporting thresholds will change going forward. Third-party payment network transactions previously only needed to be reported for payees with more than 200 transactions and $20,000 in aggregated payments. The American Rescue Plan Act of 2021 repealed this threshold and requires reporting for aggregate payments of $600 or more, regardless of the number of transactions.

The IRS is taking a phased in approach to the implementation of the American Rescue Plan Act of 2021 and guidance was provided on November 26, 2024 (https://www.irs.gov/pub/irs-drop/n-24-85.pdf). The phased-in reporting thresholds are:

• $5,000 in 2024
• More than $2,500 in 2025
• More than $600 in calendar year 2026 and thereafter.

Whether or not you receive a Form 1099-K, you must still report any income on your tax return. If you accept payments on different platforms, you could get more than one Form 1099-K. Personal payments from family and friends should not be reported on Form 1099-K because they are not payments for goods or services.

Additional Note:

Starting in tax year 2023, if you have 10 or more information returns, you must file them electronically. Electronic copies can be submitted through the IRIS Taxpayer Portal at http://irs.gov/iris or through a third-party software provider.

Penalties

If you fail to file a correct information return by the due date (to the IRS and/or taxpayer) and cannot show reasonable cause, you may be subject to a penalty. Penalties are changed for each information return which is failed to be filed to the IRS on time and to each payee (a penalty for each). These penalties can range from $60 to $660 depending on the number of days which the filing is late. Additional penalties can also be assessed for intentional disregard. Interest is also charged. More details can obtained at: https://www.irs.gov/payments/information-return-penalties

IRS Resources:

The following resources are available from the IRS with regards to the informational returns discussed in this article.

Publication 1220: https://www.irs.gov/pub/irs-pdf/p1220.pdf

1099-NEC: https://www.irs.gov/forms-pubs/about-form-1099-nec

1099-MISC: https://www.irs.gov/forms-pubs/about-form-1099-misc

1099-K: https://www.irs.gov/businesses/understanding-your-form-1099-k

1099 Penalties: https://www.irs.gov/payments/information-return-penalties

Disclaimer:

The information provided in this article is for educational purposes. This article was designed to provide accurate tax education information. Farm managers are encouraged to seek the assistance of qualified tax professionals with the completion of their taxes.

December 31 saw the end of the 135^th Ohio General Assembly. The assembly's Lame Duck session following the November election brought with it the passage of several bills that may have an effect on agriculture and natural resources throughout the state.  Any bills the legislature did not approve before the end of the session "died" and are no longer under consideration.  Here's a summary of bills the lawmakers passed, which are all now signed by Governor DeWine:

S.B. 156—Scenic Rivers.  Senate Bill 156 passed ahead of the Lame Duck session and became effective on October 24, 2024. S.B. 156 transferred the authority to administer the Wild, Scenic, and Recreational River Program from the Ohio Department of Natural Resources’ (ODNR) Division of Parks and Watercraft to the Division of Natural Areas and Preserves (DNAP). Further, the bill narrowed DNAP’s scope of authority from river areas (including land around Wild, Scenic, or Recreational Rivers) to just the watercourses of rivers.  At the same time, the bill expanded the types of watercourses that can be designated as wild, scenic, or recreational rivers to include headwaters of those rivers.

H.B. 364—Regards non-commercial seed sharing; noxious weed removal. The main goal of House Bill 364 is to help conserve pollinator species and support native plant habitats. To do this, the bill exempts from the laws governing seeds any "noncommercial seed sharing" that supports a number of activities. These activities include:

• Conservation of pollinators and threatened or endangered species;
• Planting and creation of native plant habitats;
• Propagation of native plants for their specific conservation;
• Operation of a seed library, provided that the seed library ensures that any seeds exchanged among the seed library’s members or the general public are open-pollinated, public domain varieties.

A “seed library” is defined as a non-profit, governmental, or cooperative organization or association to which both of the following apply:

• It is established for the purpose of facilitating the donation, exchange, preservation, and dissemination of seeds among the seed library's members or the general public.
• The use, exchange, transfer, or possession of seeds acquired by or from the non-profit, governmental, or cooperative organization or association are obtained free of charge.

Finally, the bill makes changes to the weed removal provisions in R.C. 4959.11, which requires managers of toll roads, railroads and electric railways to manage weeds along their roads and rights of way. The bill changes the specific requirement to destroy "Russian thistle, Canadian thistle, common thistle, wild lettuce, wild mustard, wild parsnip, ragweed, milkweed, ironweed and all other noxious weeds" to one that requires destruction of "noxious weeds" as defined in the law that applies to weed removal along county and township roadways. Several of the weeds removed from R.C. 4949.11 are not on Ohio's noxious weeds list and, especially in the case of milkweed, are beneficial plants for monarch butterflies and other pollinators. 

S.B. 54—Establish the New African Immigrants Grant and Gift Fund.  At first glance, the title of Senate Bill 54 doesn’t indicate that it has anything to do with agriculture or natural resources law. However, S.B. 54 became the “Christmas Tree” bill of the Lame Duck session, meaning that amendments not having anything to do with the original purpose of the bill were added on to it. 

S.B. 54 contains two such amendments that relate to agriculture and natural resources. The first, originally found in House Bill 683, transfers $10 million from the Ohio Controlling Board Emergency Purposes/Contingencies Fund to ODA to disburse to Soil and Water Conservation Districts for drought relief to farmers affected by the 2024 drought. 

The second addition to S.B. 54 is the creation of the Ohio River Commission. The Commission will be housed within the Department of Development, and its purpose will be to “develop and promote economic development, marine cargo terminal operations, and travel and tourism on the Ohio river and its tributaries.”  Of note are several of the powers and duties given to the Ohio River Commission, including:

• Receive, promote, support, and consider recommendations, from public or private planning organizations, and develop a master plan for Ohio River infrastructure and transportation projects;
• Coordinate with port authorities, private port operators, metropolitan planning organizations, regional transportation planning organizations, local development districts, Ohio River service entities, utility service providers, and agricultural, tourism, and recreational interests, regarding Ohio River infrastructure and transportation;
• In conjunction with applicable state agencies, coordinate with state agencies, local governments and communities, other states, and the federal government regarding Ohio River issues;
• Evaluate policies, programs, programs of research, and priorities to offset the continued decline in coal production and consumption within the Ohio River Basin and promote prosperity in Ohio’s Appalachian region; and
•  Administer development funds and seek, support, and assist the Ohio River industry in the utilization of available grants, loans, and other finance mechanisms in support of Ohio River projects.

H.B. 503—Prohibit activities re: garbage-fed swine, feral swine, wild boar.  House Bill 503 is meant to address the dangers of feral swine; namely the destruction of property and the transmission of diseases like African Swine Fever to Ohio’s commercial pig population.

The bill makes it illegal to knowingly:

• Import, transport, or possess live wild boar or feral swine;
• Release wild boar or feral swine into the wild or expanding the range of a wild boar or feral swine by introducing it to a new location; and
• Purposely feed a wild boar or feral swine.

In addition, if a person knows or has reason to know that wild boar or feral swine are present on public or private property, the law requires them to report it to Ohio Department of Natural Resources’ Division of Wildlife.  If wild boar or feral swine is present on a person’s property, they may immediately eradicate the swine without a hunting license, as long as they notify the Division of Wildlife and follow the Division’s instructions.

H.B. 503 also includes language that makes it illegal to feed garbage or treated garbage to swine, or to bring swine into Ohio that has been fed garbage or treated garbage. For the first violation, the Ohio Department of Agriculture can collect a penalty of up to $500 and can charge up to $1000 for subsequent violations.

With the 136^th General Assembly now underway, be sure to follow the Ohio Ag Law Blog for updates on legislation we'll see in this new two-year legislative session.

Thank you to Ellen Essman, J.D. with OSU CFAES Government Affairs, for authoring this post.

 

The Corporate Transparency Act ("CTA") has reached the Supreme Court of the United States (“SCOTUS”). On New Year’s Eve, the U.S. Department of Justice submitted an application to SCOTUS, seeking either a stay of the nationwide injunction or, at a minimum, a limitation of the injunction's scope to the plaintiffs specifically named in the Texas Top Cop Shop case.

How Did We Get Here? 
Although there have been multiple lawsuits filed to stop the implementation of the CTA, the nationwide injunction at issue stems from the Texas Top Cop Shop v. Garland case arising out of the Eastern District of Texas. Below is a timeline of events:  

• May 5, 2024 – Six plaintiffs, including Texas Top Cop Shop, Inc., filed a federal complaint alleging that the CTA’s reporting rule is unconstitutional and asked the court to invalidate the CTA and its reporting requirements. 
• June 3, 2024 – Plaintiffs filed a motion for a preliminary injunction seeking to halt the implementation of the CTA’s reporting requirements and deadlines. 
• December 3, 2024 – The U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction against the CTA, concluding that the CTA “appears likely unconstitutional.” The court did not rule on the constitutionality of the CTA but instead focused on whether the Plaintiffs satisfied the proof necessary for being awarded an injunction. See our post regarding the court’s decision to issue an injunction. 
• December 9, 2024 – The Government appealed the issuance of the injunction to the U.S. Court of Appeals for the Fifth Circuit. 
• December 13, 2024 – The Government filed a motion to stay the injunction issued by the lower court. A stay of an injunction essentially “lifts” or cancels out the injunction. 
• December 23, 2024 – A motions panel for the Fifth Circuit granted the Government’s motion and issued a stay on the injunction against the CTA, essentially reinstating the CTA’s reporting requirements. See our post on the motion panel’s decision. 
• December 26, 2024 – A merits panel for the Fifth Circuit reversed course and vacated the stay issued by the motions panel, effectively reinstating the injunction against the CTA. See our post on the merit panel’s decision. 
• December 31, 2024 – The Government submitted its application to SCOTUS to review the nationwide injunction.  

What Happens Next?
SCOTUS may choose to disregard the application and decline to address the challenges to the CTA, leaving the injunction intact. Alternatively, SCOTUS could opt to overturn or narrow the injunction, reinstating the CTA's reporting requirements for numerous businesses across the country. As a result, reporting companies should be prepared to promptly submit the required beneficial ownership information (“BOI”) reports.

Filing BOI Reports
Although there is no current mandate for reporting companies to file BOI reports to the Financial Crimes Enforcement Network (“FinCEN”), voluntary submissions are still being accepted. There is no charge to file a BOI report with FinCEN. Reporting companies can simply visit https://boiefiling.fincen.gov to begin the process of filing their BOI report. 

Reporting companies will need the following information: (1) the reporting company’s legal name, (2) tax identification number, (3) jurisdiction of formation, and (4) current U.S. address. For their beneficial owners, reporting companies will need the following information: (1) full legal name, (2) residential address, (3) a form of identification, which must be either a state issued driver’s license, a state/local/tribe-issued ID, a U.S. passport, or a foreign passport, and (4) an image of the identification used in number (3). Note: companies formed after January 1, 2024, will also need their company applicant information. See our law bulletin for more details on reporting requirements. 

As previously noted, filing a BOI report is free of charge, and a straightforward LLC with only a few beneficial owners can typically complete and submit the report with ease. However, a reporting company may opt to engage a professional, such as an attorney, accountant, or other third-party, to assist with the process for a fee. 

Conclusion
While there have been no significant updates to the CTA, it is essential to stay informed about potential changes on the horizon. The Government's application to SCOTUS could lead to a shift in direction in the near future. As always, we will keep you updated on the latest developments.

In a recent blog post, we discussed a federal district court’s issuance of a nationwide injunction against the Corporate Transparency Act (“CTA”), temporarily halting the requirement for businesses to file “beneficial ownership information” (“BOI”) reports with the Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”). In that post, we promised to keep you updated on the legal status of the CTA and its BOI reporting requirements. Well, we are here to tell you that the saga continues . . . 

As of December 23, 2024, that nationwide injunction is no longer enforceable, and the BOI reporting requirements of the CTA have been reinstated. The Court of Appeals for the Fifth Circuit issued a temporary stay on the nationwide injunction. The Fifth Circuit found that the government made a strong showing that it is likely to succeed in proving that the CTA is constitutional. The court explained that Congress exercised its broad authority under the Commerce Clause to pass the CTA, aiming to regulate the anonymous ownership and operation of businesses that constitute an "economic class of activities" significantly affecting interstate commerce. Consequently, the court determined that the reporting requirement for such businesses is within the scope of the Commerce Clause.

The court further concluded that “a last-minute injunction of a statute proposed and passed by the people’s representatives inevitably causes irreparable harm.” Additionally, the court determined that the burden on businesses required to report is minimal. When weighed against the “public’s urgent interest in combatting financial crime and safeguarding national security,” the court found that a stay of the injunction was justified.

Following the Fifth Circuit's ruling, the Department of the Treasury issued an alert on the FinCEN website acknowledging that reporting companies may require additional time to comply with the CTA due to the period when the preliminary injunction was in place. As a result, the reporting deadlines have been extended as follows: 

• Reporting companies established or registered before January 1, 2024, now have until January 13, 2025, to submit their initial BOI reports to FinCEN. (Previously, these companies were required to report by January 1, 2025).
• Reporting companies formed or registered in the United States on or after September 4, 2024, and before December 3, 2024, have until January 13, 2025, to submit their initial BOI reports to FinCEN.
• Reporting companies formed or registered in the United States between December 3, 2024, and December 23, 2024, have an additional 21 days beyond their original filing deadline to submit their initial BOI reports to FinCEN.
• All reporting companies created or registered in the United States on or after January 1, 2025, have 30 days to file their initial BOI reports with FinCEN. 

So, what does it all mean? 

If your farm business is registered in Ohio, compliance with the CTA's reporting requirements is once again mandatory. While farm businesses now have a slight extension to meet the BOI reporting requirements, it is probably best practice not to delay too long. 

This situation is unfolding quickly. This case may still undergo further review by the Fifth Circuit or potentially reach the Supreme Court of the United States. Additionally, several other federal courts are currently evaluating challenges to the CTA. We will make every effort to keep you informed promptly as the situation develops.