New InfoBrief Highlights Increased Focus on Payments and Withholding to Gig, Contractors and MLM Workers

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Sponsored InfoBrief from Sovos Provides Insights for Gig, Technology and Multi-level Marketing Industries to Ensure Compliance Amid Harsher IRS and State Scrutiny

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It’s important for industries with a high number of these forms—1099-NEC and 1099-K—to have withholding and information reporting processes in place that ensure their compliance.

Global tax software provider Sovos recently sponsored an InfoBrief with global market research firm IDC to examine the heightened need for organizations with a large number of gig workers and contractors to focus on their 1099 and tax withholding management processes. The IDC InfoBrief “Tax Compliance has Entered the Spotlight” explores the market drivers creating demand for non-traditional employees, the increased regulatory scrutiny these workers are generating, and what solutions exist to ensure tax compliance and avoid penalties.

There is currently a federal tax gap of more than $1 billion dollars in the U.S. Over the past 12 months the Internal Revenue Service (IRS) and state regulatory agencies have been focusing on the gig, technology and multi-level marketing (MLM) industries to help close this gap because of their high payment volumes to non-employees and independent contractors, which results in reportable income. Forms 1099-K and 1099-NEC for third-party network transactions and non-employee compensation have become easy targets for verifying compliance and ensuring proper reporting. Both forms require tax withholding management, a process that can easily become unmanageable when companies don’t have reliable contractor onboarding or 1099 reporting processes.

“We are witnessing an important shift in the way regulatory authorities track and pursue tax revenue generated through non-traditional jobs,” said Wendy Walker, solution principal, Sovos. “From what we witnessed in 2020 regarding the 1099-NEC, the only reasonable expectation is that the IRS and states will continue to increase oversight, and it’s important for industries with a high number of these forms—1099-NEC and 1099-K—to have withholding and information reporting processes in place that ensure their compliance.”

This IDC InfoBrief provides an in-depth review of why increased oversight is causing compliance issues for organizations with higher volumes of these payments and provides guidance on what they can do to remain compliant with IRS and state tax requirements.

“Tax reporting and tax withholding management have made a dramatic move from being a back office concern to operating under a pretty bright spotlight,” said Kevin Permenter, research manager, enterprise applications, IDC. “The number of non-traditional workers was already causing the IRS and states to reevaluate processes, and the COVID-19 pandemic has only accelerated the timeline. Companies need to have a strategy in place now.”

Get your complimentary copy of the IDC InfoBrief now to ensure your gig, tech or MLM organization remains compliant with its tax reporting and withholding obligations.

About Sovos
Sovos was built to solve the complexities of the digital transformation of tax, with complete, connected offerings for tax determination, continuous transaction control compliance, tax reporting and more. The company supports more than 12,000 customers, including half of the Fortune 500, operating in over 70 countries. Its SaaS products and proprietary Sovos S1 Platform integrate with a wide variety of business applications and government compliance processes. Sovos has employees throughout the Americas and Europe, and is owned by Hg and TA Associates. For more information visit and follow us on LinkedIn and Twitter.

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