Upstream Oil & Gas Accountants: Important 1099 Changes for the 2020 Tax Year12/17/2020
At P2, we provide industry-leading accounting solutions tailor-made for upstream oil and gas professionals who want applications that provide accuracy, efficiency, and cost savings. Our software delivers on these promises, plus exists as a mature and robust solution that meets the requirements of all types of operations and regions in the U.S. It is battle-tested and proven to cover edge solutions through deep, embedded functionality that newer platforms do not possess. No other upstream oil and gas accounting software compares in terms of product breadth and depth.
Equal in importance is that P2 accounting software provides audit and internal controls to meet the most stringent compliance provisions, plus accounts for every state and federal regulation for which oil and gas accountants must abide.
To help P2 customers and accounting professionals stay abreast of new and pending requirements that affect their jobs – month end, tax filings, and more – we’ve put together a list of 1099 changes that were put in place by the IRS.
1099 Changes at a Glance
For 2020, the IRS announced earlier this year that it would be introducing the following changes to the 1099, to clear up confusion as to the due date of the existing 1099-MISC form:
- Introduction of a new form, 1099-NEC, to handle nonemployee compensation
- Form 1099-MISC changes
- The due date for filing Form 1099-MISC to the IRS is now March 1 (paper) and March 31 (electronic), or the next business day
- Box 7: Leave blank, previously contained Nonemployee Compensation
- Box 10: Gross Proceeds Paid to an Attorney, previously box 14
- Box 15: State Income Tax Withheld, previously box 16
- Form 1099-NEC
- New form for the 2020 tax year
- The due date for the 1099-NEC form is January 31, or the next business day
- Box 1: Nonemployee Compensation
- Box 4: Federal Income Tax Withheld
- Box 5: State Income Tax
The Impact on Oil and Gas Producers
The change to the 1099 will affect oil and gas producers in how interest types are defined, especially the difference between working interest and other types of interest. Working interest income will shift to the 1099-NEC form, while all other interest-related income will remain on the 1099-MISC form. Furthermore, any state and federal tax withholding needs to be represented on its respective form. Lastly, the IRS and third-party 1099 processing services are changing their electronic submission formats to account for the 1099-NEC form and the changes to the 1099-MISC.
Regardless of which accounting software an oil and gas producer is using, ensuring compliance with the 1099 changes will require changes to business processes, software updates, or both.
How is P2 Responding to this Regulatory Change?
Across P2’s accounting and land solutions, our development teams have been proactively changing the 1099 regulatory components to comply with the 2020 changes to ensure our customers are as prepared as possible. Keeping up with regulatory changes is a significant part of P2’s investment; we cover changes to regulations at all levels: federal, state, and public lands.
For IRS information on this regulatory change, visit: https://www.irs.gov/instructions/i1099msc.
If you’re a P2 customer and have questions, please contact support: 1-844-REACH-P2 (1-844-732-2472).
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