1099s for Tax Year 2016

Transcription

1 1099s for Tax Year 2016 Critical Changes to Deadlines and Penalties

2 ABOUT THE SPEAKER Spent over 7 years at Intuit Senior Product Manager, Customer Care for Accountants, Innovation Team Was a 1099 Contractor for 8 years Web Site Design business for SMBs in Wisconsin Founded Payable, a Startup Focused on 1099s Venture-backed in Silicon Valley. Filed over 50, forms in 2015.

3 OVERVIEW Worker Classification 1099-MISC Basics Changes for Tax Year 2016 Electronic Delivery to Recipients Getting Ahead on Tax Season with W-9s Buying Time With Extensions Tying it All Together Quick Demo of Payable

4 WORKER CLASSIFICATION W-2 or 1099?

5 WORKER CLASSIFICATION - THE IRS 20-FACTOR TEST Instructions Training Integration Services Rendered Personally Hiring, Supervising, and Paying Assistants Continuing Relationships Set Hours of Work Full-Time Required Doing Work on Employers Premises Order or Sequences Set

6 WORKER CLASSIFICATION - THE IRS 20-FACTOR TEST Oral or Written Reports Payment By Hour, Week, or Month Payment of Business and/or Traveling Expense Furnishing Tools and Materials Significant Investments Realization of Profits or Losses Working for More Than One Firm at a Time Making Services Available to the General Public Right to Discharge Right to Terminate

7 WORKER CLASSIFICATION Clear, right?

8 1099-MISC BASICS

9 1099-MISC REQUIREMENTS Key Terms Payer - The entity that made payments to the Independent Contractor. Recipient - The entity receiving payments from the Payer. Required Information Payer Legal Name, Payer Tax ID, Physical Address, Payer Phone Number Recipient Legal Name, Recipient Tax ID, Physical Address Payments in excess of the threshold for at least one Box

10 1099-MISC BOX THRESHOLDS Box 1 - Rents - $600 (unless paid to a real estate agent) Box 2 - Royalties - $10 Box 3 - Other Income - $600 (e.g. Game Show winnings) Box 4 - Federal Income Tax Withheld - Anything Box 5 - Fishing Boat Proceeds - $600 Box 6 - Medical and Health Care Payments - $600 Box 7 - Nonemployee Compensation - $600 Box 8 - Substitute Payments in Lieu of Dividends or Interest - $10

11 1099-MISC BOX THRESHOLDS (CONTINUED) Box 9 - Direct Sales of $5k in Consumer Products to a buyer for resale - Check the box Box 10 - Crop Insurance Proceeds - $600 Box 13 - Excess Golden Parachute Payments - $600 Box 14 - Gross Proceeds Paid to An Attorney - $600 Box 15 - Section 409A Deferrals/Income - $600

12 POLLING QUESTION #1 What info is required to be on the 1099?

13 1099 CONTRACTOR WITH A PAYMENT THRESHOLD EXCEEDED You ll need to file What do you need to know?

14 CRITICAL CHANGES FOR DEADLINES E-Filing 1099 with the IRS - January 31, 2017 NOT February 28, and definitely not March 31, 2017 This is specifically for 1099-MISC with Box 7 amounts greater than $600, but that s most of the forms so this effectively becomes the new date IRS is trying to limit the window for tax fraud Delivery of 1099 to Recipient - January 31, 2017 This is unchanged, but having Delivery and E-Filing at the same time, you ll want to have your corrections process prepared

15 CRITICAL CHANGES FOR 2016 FILING PENALTIES File within 30 days of deadline $30 $50 File after 30 days of deadline $50 $100 After August 1 st or Do Not File $100 $260 Intentional Disregard $250 $530

16 CRITICAL CHANGES FOR 2016 DELIVERY PENALTIES Deliver within 30 days of deadline $30 $50 Deliver after 30 days of deadline $50 $100 After August 1 st or Do Not Deliver $100 $260 Intentional Disregard $250 $530

17 IN OTHER WORDS You have less time and increased penalties

18 POLLING QUESTION #2 Which deadline changed for Tax Year 2016?

19 GET AHEAD WITH YEAR-ROUND W-9 COLLECTION Best Practice: Get the W-9 up front Prior to the first payment if possible Pretty Good Practice: Check to see vendors near $600 Analyze vendor payments for each company that are at or have exceeded $600 Reach out to those with missing W-9s for that info Last Resort: January Crunch You have only 20 workdays to collect the info , call, wrangle, and hassle your way to avoid the $260 penalty per form

20 DELIVERY: COLLECTING ELECTRONIC CONSENT Physical Delivery of 1099s is the requirement You need to capture electronic consent in order to send digitally In other words don t 1099s around! Small excerpt from the IRS Instructions The recipient must consent in the affirmative and not have withdrawn the consent before the statement is furnished. The consent by the recipient must be made electronically in a way that shows that he or she can access the statement in the electronic format in which it will be furnished. You must notify the recipient of any hardware or software changes prior to furnishing the statement. A new consent to receive the statement electronically is required after the new hardware or software is put into service

21 POLLING QUESTION #3 When do you collect the W-9?

22 BUY TIME WITH EXTENSIONS Extension on E-Filing Form Request for Extension of Time to File Information Returns Automatic 30-Day Extension Must be done prior to the deadline Fax: Mail: Internal Revenue Service Attn: Extension of Time Coordinator 240 Murall Drive, Mail Stop 4360 Kearneysville, WV 25430

23 BUY TIME WITH EXTENSIONS Extension on Recipient Delivery No Specific Form, Need to Send letter to IRS (key components listed below) NOT Automatic If Granted, provides 30 extra days for delivery If not granted, the act of requesting ends up getting you a day grace period Key Info to include in your letter: The payor s name, payor s TIN, payor s address, type of return (e.g., Form MISC), a statement that the extension request is for providing statements to recipients, reason for delay (this does not need to be detailed), and the signature of the payor or authorized agent.

24 POLLING QUESTION #4 What form do you need to send to the IRS for E-Filing Extension?

25 TYING IT ALL TOGETHER Less Time, Increased Penalties 20 workdays to file Penalties roughly doubled Get Ahead On Info Collection Start tracking down missing info now W-9 is your best friend Software Can Help Automate W-9 Collection Streamline 1099 Form Generation, E-Filing, and Delivery

26 DEMO: PAYABLE - TAXES & COMPLIANCE

27 POLLING QUESTION #5 What changes will you make after this webinar?

28 Thank you! Avoid the January Crunch! Tad Milbourn payable.com/accountants