2017 Updates on 1099 s & W-2 s: Important Changes in Reporting & Penalties. Mary Gerlach, EA Morgan Rust 1

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1 2017 Updates on 1099 s & W-2 s: Important Changes in Reporting & Penalties Mary Gerlach, EA Morgan Rust 1

2 What are 1099s? They are forms to report different types of payments made Interest Dividends OID (Original Issue Discount) Retirement Distributions Miscellaneous 2

3 1099-Misc 3

4 Who Files Company or owner that makes payments to the contractors for services NOT goods Only business payments Who Receives Contractor IRS Also require form 1096 for each type of 1099 Oregon 4

5 What is Reported Business payments totaling $600 or more Rents Services Prizes & Awards Royalties Fishing Boat Proceeds Medical & Health Care Attorney Fees - legal fees and gross proceeds from a settlement Non Employee Compensation 5

6 What is Non-Employee Compensation? Made payment to someone who is not your employee Made the payment in the course of your business Made payment to an individual, partnership, estate, or corporation (attorneys and medical for-profits) Made payments totaling at least $600 during the year 6

7 Exceptions: If a Corporation DON T Send C Corp S Corp LLC electing Corp status DO Send Attorney fees and medical for-profits need a 1099 regardless of Corp status 7

8 W-9: Key Info 8

9 W-9: Key Info Best practice: Have the contractor fill this out before the work is performed If not received: Per the IRS, you don t have to pay until they return the form You can include backup withholding on their pay (28%) Annual Form 945 9

10 Due January 31, 2018 All Copies January 31 10

11 Penalties Failure to file/furnish correct payee statements $260 per each failure Maximum is $3,218,000 in the calendar year If intentionally disregarded, penalty increases to the greater of: $530 per failure OR 10% of the aggregate amount of items to be reported (no maximum applies) 11

12 Abatement Reasonable cause Inconsequential error Any failure that does not make it difficult for the IRS to put the info to its intended use Preventing a payee from timely receiving correct info and reporting it on their return Exceptions for De Minimis failure If no single amount error differs from the correct amount by more than $100 No single amount reported for tax withheld by more than $25 12

13 Employment audits Cracking down on correct classification iwire/revenue Online All must be electronically submitted Same deadline January 31, 2018 Can use Revenue online account Bulk entry, manual, or spreadsheet entry OR may assess penalties for up to $25,000 Not filing electronically Filing incorrectly Filing late 13

14 Payroll Forms Quarterly Forms Federal 941 Form Due last day of the month following the quarter end OQ & 132 Form Oregon Annual Forms: Due January 31, Form (for federal unemployment) WR Form for Oregon W-2's for Social Security & Oregon 14

15 W-2 Examples Gross Wages: $50,000 15

16 S Corp Owner Health Insurance Gross Wages: $50,000 16

17 S Corp Owner/Personal Use of Auto Gross Wages: $50,000 17

18 401(K), HSA, Health Insurance Gross Wages: $50,000 18

19 Form 941 & W3 19

20 Social Security 20

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22 Oregon Filing 22

23 What happens if I don t file timely? Trust Funds Employee portion of withholdings from paycheck Federal & state Employee portion of Social Security & Medicare Employer is responsible to timely pay trust funds 23

24 What happens if I don t file timely? Trust Recovery Funds Employer can be held personally responsible to pay trust funds Including penalties and interest 24

25 What happens if I don t file timely? Penalties 25

26 W-2 Penalties Small Businesses with Gross Receipts $5 Million of Less Time Returns Filed/Furnished Due thru (inflation adjusted) Due thru (inflation adjusted) Not more than 30 days late (by March 30 if the due date if February 28) $50 per return/$186,000 maximum $50 per return/$187,500 maximum 31 days late August 1 $100 per return/$532,000 maximum $100 per return/$536,000 maximum After August 1 or Not At All $260 per return/$1,064,000 maximum $260 per return/$1,072,500 maximum Intentional Disregard $530 per return/no limitation $530 per return/no limitation 26

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28 Who can help with payroll reports? Payroll processing is one of the best services a company can pay for: More complicated Accuracy is important Timely deposit and filing Liability 28

29 Additional Information Social Security Administration Electronic Filing dler.do Paper File Social Security Administration Direct Operations Center Wilkes-Barre, PA (for Certified Mail use ZIP Code ) 29

30 Additional Information 1099-MISC Form W-9 Form Oregon iwire/revenue Online ses/pages/iwire.aspx 30

31 Who are the payroll specialists at Doty Pruett Wilson, PC? Michiyo Taenaka, CPA Mary Gerlach, EA Call us with questions: (503)

32 Questions? 32