1099 Rule Changes Assignors Need to Know

As a sports official assignor, your responsibilities extend beyond coordinating schedules and ensuring games run smoothly. One crucial aspect is understanding the 1099 tax reporting requirements and recent changes that could affect how payments to officials are managed. Whether payments are handled directly by you, the leagues, or through software platforms, staying informed is key to maintaining compliance and avoiding potential penalties.

What Is Form 1099?

Form 1099 is an information return used by the Internal Revenue Service(IRS) to track income paid to individuals who are not employees. Most youth sports officials fall into this category, but many fall under the current reporting threshold (usually $600/yr), or the entity making the payment simply doesn’t issue 1099’s. The latter case is becoming more and more risky since the federal government is increasing audits... more on that later.

Who Is Responsible for Completing the Reporting Process?

The responsibility depends on who makes the payment:

• Assignors: If you pay officials directly, you are responsible for issuing Form 1099-NEC to any official paid $600 or more in a year. You must collect W-9 forms from payees, maintain payment records, provide the appropriate 1099 form to the payee, and ensure timely filing with the IRS.
• Leagues or Organizations: If the league or sports organization pays the officials (based on reporting you provide, for example), they are responsible for issuing Form 1099-NEC to any official paid $600 or more in a year. The organization must collect W-9 forms from payees, maintain payment records, provide the appropriate 1099 form to the payee, and ensure timely filing with the IRS.    
• Payment-integrated Assigning Platforms: If payments are processed and paid through a software platform acting as a third-party settlement organization (TPSO), the platform is responsible for issuing Form 1099-K. Notch is an example of a payment-integrated assigning platform. It handles all 1099 requirements for officials and removes all 1099 responsibilities from assignors, leagues and sports organizations. Interestingly, up until the end of 2023, TPSO’s only needed to issue 1099’s to officials who were paid $20,000 or more in a year from over 200 transactions. For the 2024 tax year, it looks like the threshold will be $5,000, but this is expected to eventually be in line with the $600 threshold for 1099-NEC’s.

What Should 1099 Filers Focus On?

Key Deadlines:

• Recipient Deadline: Payors must provide the appropriate 1099 form to the payee by January 31.
• ‍IRS Filing Deadline: If filing by paper, the IRS filing deadline is February 28; electronic filings are due by March 31.

Electronic Filing Mandate:

Prior to tax year 2024, an organization filing 250 or more returns or statements (including 1099’s) in a calendar year was required to file electronically, rather than by paper. However, the IRS recently released rules requiring organizations filing 10 or more statements to file 1099’s electronically. Therefore, most assignor activity now requires electronic filing of 1099’s.

State Filing Requirements:

While many are aware of federal 1099 filing requirements, many states require direct filing of similar informational returns for non-employee income, and they may have different reporting processes, thresholds and filing deadlines. This complexity creates a field day for states looking to bring in additional tax revenue through penalties and interest.

Potential Penalties:

If you are late to file, or your 1099 filings are incorrect, the penalties range from $50 to $290 per form, depending on how late you file, with a maximum penalty of up to $1.2m for small businesses. For first time offenses, the tax authorities can be lenient. But, if you are deemed to have failed to file ‘intentionally,’ there is no cap on the total penalty. Additionally, if you fail to file with the IRS and fail to furnish the payee statement, penalties can be imposed for both failures, effectively doubling the penalty.

Increased Scrutiny:

The IRS was bolstered by $80B in new funding as part of the Inflation Reduction Act, signed into law in 2022. After a hiring binge, the IRS announced in 2024 it plans to ramp up audits to crackdown on tax cheats and deliver more revenue into the U.S. treasury. While the IRS indicated most of the new audits would target high net worth corporations and individuals, some worry the increased personnel and resources will allow greater scrutiny of all taxpayers.

Conclusion – What Should I Do As An Assignor?

Navigating 1099 reporting requirements is a critical aspect of an assignor's duties since so many youth sports officials fall into this form of tax reporting. Understanding who is responsible for tax reporting—be it you, the leagues, or software platforms—is essential for compliance. With reporting complexity increasing and the IRS tightening its grip, we recommend assignors of all sizes seek to remove themselves from directly paying officials. Even if assignors outsource the filing process to accounting platforms, they are still ultimately responsible if mistakes are made.

Consider shifting direct payment and tax reporting responsibility to the clubs, leagues or sports organizations since they likely issue 1099’s already. Or better yet, leverage an assigning platform with an integrated payment process that handles 1099reporting automatically. By knowing your responsibilities and making smart choices, you can focus on your primary goal: ensuring that every game runs smoothly.