The Pennsylvania Department of Revenue recently unveiled a set of 1099 reporting requirements that will alter the landscape of reporting in the Keystone State. One regulation in particular will come as a welcome relief for institutions that report large volumes of 1099-R forms.
Pennsylvania will allow multiple distribution codes for one person or entity to appear on the same 1099-R form. By moving to multiple-code forms, Pennsylvania is relieving a long-standing pain point for 1099-R filers. The new policy will replace the old requirement of reporting a separate form for each distribution code.
Institutions must file a form 1099-R for each person or entity who received a distribution of $10 or more from programs such as profit-sharing or retirement plans, IRAs, annuities, pensions, insurance contracts and survivor income benefit plans.
Changing processes for Pennsylvania 1099-R reporting
While many tax professionals will welcome the change in Pennsylvania’s requirements, they will nevertheless have to adjust their reporting processes to accommodate the shift. It’s critical for financial institutions to have systems in place that can adapt quickly to change and reconfigure reporting processes on the fly.
Pennsylvania is also making two other critical changes to 1099 policy. In alignment with a new proposed IRS regulation, Pennsylvania will require payers with more than 250 1099 forms to file electronically. The new requirement will also be a welcome change for tax professionals, as it will help eliminate time-consuming paper-based processes. For the state, electronic filing will reduce the risk of stolen identities and refund fraud.
However, in conflict with the IRS and all other states with 1099 reporting requirements, Pennsylvania is moving its reporting deadline to Jan. 31—regardless of weekends or holidays. The IRS and other states take into account holidays and weekends to accommodate deadlines. In Pennsylvania, forms will be due on Jan. 31, for instance, even if that date falls on a Saturday.
States breaking down walls
The changes in Pennsylvania come at roughly the same time as an announcement from New York that the state will change its 1099-R reconciliation requirement from an annual to a quarterly basis. In general, states are taking the lead in changing regulations and moving to new models aimed at helping them collect revenue more quickly and efficiently.
Payers should be watchful to see whether state regulations eventually find their way into IRS policies. In any case, however, institutions have to be prepared for rapid change in compliance requirements at both the state and federal levels.