IRS 1099 (CF/SF) Combined Federal and State Filing Program Explained — What is CF/SF?
The Combined Federal and State Filing Program (CF/SF) is an IRS initiative established over 20 years ago to streamline the 1099 reporting process for businesses with both the IRS and state(s). The primary purpose of this program is to alleviate the administrative burden by combining the process of filing 1099s with the IRS and the required state(s).
In essence, the 1099 CF/SF program operates by leveraging the information provided in federal returns. The IRS, acting as an intermediary, forwards this information to the relevant states that have chosen to participate in the program on behalf of the businesses. This integration aims to enhance efficiency and reduce the burden on businesses engaged in reporting.
It’s important to note that CF/SF is not a complete replacement for Direct State Reporting (DSR) because not all 50 states participate in the CF/SF program. Therefore, businesses must still fulfill their direct state reporting obligations for states not covered by CF/SF.
Furthermore, even in states that are part of the CF/SF program, businesses may still be required to file the same form directly with the state. Understanding the specific states with direct state reporting obligations and the corresponding form types is essential to ensuring accurate reporting and avoiding potentially costly state penalties.
Which states participate in the 1099 CF/SF Program?
States participating in the Combined Federal and State Filing (CF/SF) Program have varying requirements for reporting, and they can be categorized into three groups based on their participation and reporting preferences:
1. States Participating in the CF/SF Program
- Arkansas
- Hawaii
- Idaho
- Louisiana
- Maine
- Maryland
- Michigan
- Missouri
- Nebraska
- New Jersey
For these states, businesses can fulfill their state filing requirements through CF/SF filings, and it is expected that the CF/SF submission meets all the necessary state reporting obligations.
2. States Participating in the CF/SF Program (Require Additional or Direct Reporting)
- Alabama
- Arizona
- California
- Colorado
- Connecticut
- Delaware
- Georgia
- Indiana
- Kansas
- Massachusetts
- Minnesota
- Mississippi
- Montana
- New Mexico
- North Carolina
- North Dakota
- Ohio
- Oklahoma
- South Carolina
- Wisconsin
- District of Columbia
- Pennsylvania
While these states participate in the CF/SF program, they may still require businesses to submit additional or direct reports, indicating that CF/SF filings alone may not be sufficient to meet all state filing requirements. Businesses should be aware of and comply with any supplementary reporting obligations.
3. States Not Participating in the CF/SF program
- Iowa
- Kentucky
- Oregon
- Rhode Island
- Utah
- Vermont
- Virginia
- West Virginia
- Illinois
These states have their own 1099 state filing requirements, and businesses are required to file 1099 individually with each state.
4. States Without State Income Tax (No Reporting Obligation)
- Alaska
- Florida
- Nevada
- New Hampshire
- New York
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
States without state income tax do not have reporting obligations for income tax purposes. Businesses operating in these states are not required to file state returns related to 1099 information.
Limitations of the 1099 CF/SF Program
While the Combined Federal and State Filing 1099 (CF/SF) program streamlines the reporting process for businesses, there are several limitations and considerations to be mindful of:
1. Limited Form Types
The CF/SF program supports a specific set of 1099 form types. As of tax year 2022, only 11 forms are included in the program: 1099-B, 1099-DIV, 1099-G, 1099-INT, 1099-K, 1099-MISC, 1099-NEC, 1099-OID, 1099-PATR, 1099-R, and Form 5498. Businesses using other form types may still need to fulfill state reporting obligations separately.
2. Form Type Discrepancies
Not all form types required by states are covered by the CF/SF program. For instance, certain states may mandate the reporting of Form W-2G, which is not included in the 1099 CF/SF program. This necessitates businesses to be aware of the specific form types required by each state and fulfill those requirements accordingly.
3. Timing Challenges
The timing of states receiving 1099 information through the CF/SF program can pose challenges. The IRS typically shares original return information with the states in late April or later. Some states may choose not to participate in the CF/SF program and instead require direct state reporting to ensure more timely access to the information. Additionally, states participating in the program may impose earlier filing deadlines than the IRS, necessitating businesses to submit returns promptly to meet state requirements. For instance, Washington D.C. requires direct reporting of all 1099s by January 31, whereas the IRS deadline for Form 1099-MISC is March 31 for certain payment types.
4. Correction Form Challenges
Filing correction forms can complicate the process, especially for states requiring direct reporting with early deadlines. For instance, Colorado mandates direct reporting of 1099 returns by January 31. If corrections are needed, it may delay the submission, potentially missing state deadlines.
Conclusion
Understanding tax filing can be challenging, especially regarding the 1099 CF/SF program, and requires a clear understanding of participating states, limitations, and deadlines. As businesses strive for efficiency in their reporting processes, it’s essential to leverage tools like TaxBandits for seamless e-filing. With support for both federal and state filings, along with features like online and postal delivery of recipient copies, bulk import 1099 forms, and TIN matching, TaxBandits ensures a smooth and compliant 1099 filing experience. Take control of your tax reporting today and explore the benefits of e-filing with TaxBandits.
