Federal, State & Local Employment Tax. Backup Withholding and Form 1099 Miscellaneous Update

Transcription

1 Federal, State & Local Employment Tax Backup Withholding and Form 1099 Miscellaneous Update

2 Presenter Michael Durland CPA, Revenue Agent, FSL/ET

3 Backup Withholding Internal Revenue Code Section 3406 Withhold specified percentage (currently 24%) Of reportable payments Reported on information returns 3

4 Form 1099 Reminders Paid $600 or more for: Rent Non-employee compensation Prizes and awards Medical or healthcare costs Attorney payments Issue Form 1099-MISC to: 4 Individuals and partnerships Corporations - if medical, health care, or attorney payments

5 5 Information Return Law Updates New Filing Due Date : January 31st Forms W-2/W-3 to SSA Forms 1099-MISC, Box 7 to IRS Inflation-Indexed Penalty Amounts Effective: January 1, 2016

6 6 IRC 6721/6722 Penalties for Failure to File & Failure to Furnish Information Returns due Jan. 1 st, 2016 forward Not more than 30 days late = $50/return [capped at $532,000] 31 days late up to August 1st = $100/return [capped at $1,596,500] Later than August 1st = $260/return [capped at $3,193,000/calendar year]

7 7 IRC 6721 Penalty Failure to File De Minimis Failures If corrected and filed by August 1 st Then, the failures may not exceed the greater of: 1. 10; or 2. One-half of one percent (.005) of the information returns required to be filed

8 8 IRC 6721/6722 Penalties for Failure to File & Failure to Furnish Intentional Disregard The greater of: 1. $520 per information return (>2016); or 2. Ten percent (10%) of the aggregated amounts required to be reported correctly; and 3. the caps on penalties are removed.

9 9 IRC 6723 Penalty Failure to Comply with Other Reporting Requirements $50 per Information Return [Capped at $100,000/calendar year]

10 Questions Entity classification/type? Reportable payments? Backup withholding apply? File Form 1099 with the IRS? Furnish Form 1099 to payee? Payee s Taxpayer Identification Number (TIN)? 10

11 Form W-9 Specify Limited Liability Company (LLC) classification Corporation Partnership Disregarded entity Some payees exempt from backup withholding Payee must provide TIN 11

12 12 Backup Withholding (BWH) Common payments subject to BWH: Interest and dividends Rents, royalties Commissions Gross proceeds paid to attorneys Non-employee compensation Certain payments are excluded from BWH

13 Backup Withholding Ex 1 BWH required when a reportable payment is made to a payee: Not exempt from BWH Who hasn t provided their TIN 13

14 Backup Withholding Ex 2 BWH required when: Payer receives a CP2100 or CP2100A Notice (CP Notice) from the IRS listing TINS that are: Missing Incorrect, and/or Not currently issued 14

15 CP2100 & CP2100A Notices Large volume filers Have 250 error documents Receive a CD or DVD data file CP2100 Mid-size filers Have error documents Receive a paper CP2100 Small filers Have < 50 error documents Receive a paper CP2100A 15

16 16 CP Notice Missing TIN Begin BWH on payee payments Continue BWH until the TIN is received Missing TIN Not provided Has more or fewer than nine numbers Has an alpha character as a number See FAQ #19 in Publication 1281

17 B Notice 1 of 2 B ackup withholding Notice There are two B Notices The First B Notice when a payee appears only once on the last 3 annual CP Notice lists The Second B Notice - when a payee appears on 2 of the last 3 annual CP Notice lists. The information may not be solicited by telephone 17

18 CP Notice Incorrect TIN If your information does not agree with the CP Notice, no B Notice is required to be sent. It could be the result of: A recent update to SSA records, An error in the information you submitted, or An IRS processing error If your information and the CP Notice agree, send the appropriate B Notice to the payee (unless it relates to the same tax year as the earlier CP Notice - See Publication 1281.) 18

19 B Notice 2 of 2 For the two B Notices, on the outside mailing envelope, mark: IMPORTANT TAX INFORMATION ENCLOSED or, IMPORTANT TAX RETURN DOCUMENT ENCLOSED 19

20 First B Notice Requirements Send First B Notice & Form W-9 by the later of 15 business days from date Of CP Notice You receive it Begin BWH if no signed Form W-9 received Stop BWH when a signed Form W-9 is received 20

21 Second B Notice Requirements 1 of 3 Send Second B Notice within 15 business days after you receive the second CP Notice Don t include a Form W-9 Payee to contact IRS or SSA Payer must receive a validation of the payee name/tin combination 21

22 22 Second B Notice Requirements 2 of 3 Payee validates these by providing payer: SSN - a current Social Security card EIN - an IRS Letter 147C

23 Second B Notice Requirements 3 of 3 Begin BWH no later than 30 business days after receipt of the CP Notice, unless Social Security card or IRS Letter 147C received from payee Stop BWH within 30 days after receiving the validation 23

24 Third and Subsequent B Notice After two CP Notices received and two B Notices sent for a name/tin combination, check 2nd TIN Not. box on Form Ignore subsequent CP Notices for that name/tin. If a CP Notice is received for the same payee but different name/tin combination, treat the notice as a first CP Notice and send a First B Notice. 24

25 Form 945 Report backup withholding tax annually Follow deposit requirements in Publication 15, (Circular E), Employer s Tax Guide 25

26 Where to Call for Help Backup withholding, information reporting, Forms 1099, CP Notices: The Information Reporting Program Centralized Customer Service Site Telephone (toll free) (not toll free) Hours 8:30-4:30 pm M - F, EDT mccirp@irs.gov 26

27 TIN Matching Service You may verify any Taxpayer Identification Number (TIN) by registering with the IRS s TIN Matching Program Use of the TIN Matching program will reduce the number of TIN/Name mismatches and protect the employer from civil penalties Failure to register and/or use program will not be used to impose civil penalties on non-users 27

28 TIN Matching Service The TIN Matching Program contains all Social Security Numbers (SSNs), Individual Taxpayer Identification number (ITINs), and Employer Identification Numbers (EINs) issued by SSA and IRS Register with IRS e-services at 28

29 TIN Matching Service Interactive TIN Matching - Match groups of up to 25 payee name/tin combinations up to 999 requests Bulk TIN Matching Submit a file with up to 100,000 TIN/name combinations See Publication 2108A See how to video at IRSvideos.gov 29

30 30 RESOURCES IRS Forms and Publications Forms FORM) (800-TAX- General Instructions for Certain Information Returns (Catalog #27976F) Instructions for Forms 1099-MISC (Catalog #11409F)

31 31 RESOURCES Tax-Exempt/Government Entities Customer Account Services (8:00 am - 9:30 pm EST) Federal, State & Local/Employment Tax (FSL/ET) governments/information-returns

32 32 End of Presentation Thank You!