Possible Required Information Return Reporting

Transcription

1 Information Reporting Forms 1099

2 Possible Required Information Return Reporting Form 1099-MISC Code Section 6041, 6041A, 6045(d) & (f) 6050A, 6050N, 6050R 1099-INT 6041, R 408(i),6047(d) 1099-G 6041, 6050B, 6050D, 6050E

3 Form 1099-INT, Interest Income Section 6041 vs. Section 6049 Interest is reportable under both code sections $600 or more, 6041 $10 or more, 6049 (generally applies to banks) However, Regulations (a), If amount is to be reported under 6049, Then not reported under 6041.

4 Form 1099-INT (cont d) Interest payments made in course of trade or business are subject to reporting by persons including a governmental unit, international organization, or any agency or instrumentality Interest payments made to these units are exempt from reporting

5 Form 1099-G, Certain Government Payments Payments are separately reported for: State or local income tax refunds, credits, or offsets of $10 or more, 6050E Taxable grants of $600 or more, 6050D Backup withholding, if applicable

6 Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Governmental section 457(b) plans Beginning in 2002, distributions from section 457(b) plans maintained by state or local governments are reported on Form 1099-R, not Form W-2. However, payers may continue to rely on Notice , C.B. 174

7 Form 1099-MISC, Miscellaneous Income File this form if you have paid (in the course of your trade or business): $10 or more in royalties or broker payments in lieu of dividends id d or tax-exempt tinterest t $600 or more Rents Services Prizes or awards Medical or legal payments Gross proceeds to an attorney

8 Items not Reported on Form 1099-MISC Payments to a corporation Exceptions- attorney fees & medical payments (including payments to vets for FFA) Payments for merchandise only Payments of rent to RE agents Scholarships Certain payment card transactions Payments to tax-exempt organizations, the U.S., states, and political subdivisions

9 Items not Reported on Form 1099-MISC Wages to employees Payments to employees; such as fringe benefits or travel reimbursements (Note: if paid as part of a non-accountable plan, then travel reimbursements and auto expenses should be included in wages and reported on W-2)

10 Recipient Information Recipient Name Show full name and address Sole proprietors Individual s name on first line DBA may be entered on second name line For TIN either SSN or EIN

11 Form 1099-MISC Box 1 - Rents Real estate rentals (unless paid to real estate agent) Machine rentals Surface Royalties (rentals of pasture)

12 Form 1099-MISC Box 2 - Royalties In Box 2report oil and gas royalties of $10 or more Use of scripts for one act plays?

13 Form 1099-MISC Box 3 - Other Income Other income not reportable elsewhere Prizes and awards not for services performed or paid to employees Various damage payments Deceased employee s accrued wages (See instructions for W-2 and W-3) See General Instructions for Forms 1099, 1098, 5498 and W-2G for additional items

14 Form 1099-MISC Box 4 Income Tax Withheld Backup withholding Current rate is 28%

15 Form 1099-MISC Box 6 Medical and Healthcare Payments Report payments to individuals, partnerships, and corporations Medical payments include doctor fees, drug testing, lab fees, physical therapy, etc. Not required to report payments to pharmacies Vets provide a medical service

16 Form 1099-MISC - Box 7 Nonemployee Compensation Payment for services (should include parts or materials) Professional service fees ex. attorneys (including corporations), architects and accountants t Prizes and awards for services performed as a nonemployee

17 Form 1099-MISC.- Box 14 Gross Proceeds Paid to an Attorney Defining Gross Proceeds Payments made to an attorney as part of a legal l settlement or court order Payment may be issued in the names of the attorney and the client May include an amount for the attorney s services

18 Form 1099 Void Returns If you make an error while preparing a form, Enter an X in the VOID box at top of form Go to next form and enter the correct information (Do not mark the CORRECTED box) Submit entire page even if only one form is completed correctly

19 Form 1099 Adobe crobat Docume Corrected Returns See the Instructions for Forms 1099, 1098, 5498, and W-2G for instructions on corrected returns Includes step-by-step chart for filing corrected returns on paper p forms (up to 249)

20 Form 1099 Due Dates To Recipient i - January 31 st To IRS, if filed on paper, by February 28 th With Form 1096, Annual Summary and Transmittal of U.S. Information Returns If filed electronically- March 31 st **Form 4804, Transmittal of Information Returns, is no longer required

21 Who must file electronically? If you are required to file 250 or more information returns, you must file on electronically* Filing requirement applies separately To each type of form To originals and corrections * You may choose to file electronically even if you are filing less than 250 forms.

22 Form 1096 You must submit a separate Form 1096 with each type of form you file by paper. For example, if you file Forms 1099-R and 1099-MISC, complete one Form 1096 to transmit Forms 1099-R and another for Forms 1099-MISC.

23 Furnishing Form 1099 to Payee Electronically Consent Format Posting Notice Undeliverable electronic address Retention Refer to Publication 1179, General Rules and Specifications for Substitute Forms, for more information

24 Information Return Penalties IRC Section 6721 Failure to File Correct Information Returns May be subject to penalties if: Fail to file timely Fail to include all information required to be shown on a return Include incorrect information on a return File on paper when you were required to file electronically

25 Information Return Penalties Reduction in penalty if: Correctly filed by March 30- $30 per return Correctly filed after March 30 but before August 1- $60 per return No return filed or correctly filed by August 1 or later- $100 per return

26 Information Return Penalties IRC Section 6722 Failure to Furnish correct Payee Statements Subject to penalties if: Failure to furnish by January 31st Failure to include all required information Include incorrect information Same reductions apply

27 Form W-9, Request for Taxpayer Identification Number and Certification Purpose of form Secure information required to make a decision whether to file a Form 1099 Solicit TIN even for one-time transactions May use substitute version May incorporate into other business forms

28 Form W-9, Request for Taxpayer Identification Number (TIN) and Certification Sole proprietor can use both SSN or EIN but a SSN should be matched with the individual s id name on name line Corporations, partnerships & estates t - use EIN Enter business name as shown on required Federal tax documents on Name line Can enter DBA or business name on Business Name line

29 LLC and Reportable Payments An LLC (Limited Liability Company) may be taxed as either a sole proprietor (disregarded entity), a partnership, or a corporation Obtain a Form W-9 from the payee to determine the entity s status Name must match with TIN Certify TIN is correct

30 TIN Matching Program TIN matching programs allow payers or authorized agents who submit Forms 1099-INT, DIV, PATR, OID, MISC, or B, the capability of submitting an online taxpayer identification (TIN) and name combination to be matched against IRS records Matching can be completed prior to filing information returns

31 TIN Matching Program Payer must also have filed these forms during the prior 2 years System allows user to input TIN/Name combination and the system matches against master files Accessible through IRS website:

32 Are you required to Backup Backup withhold if: Withhold? 1. You make reportable payments to persons (or corporations) who have not furnished their valid TIN or, 2. IRS notifies you to begin withholding Withholding rate has been 28% since 2003

33 Are you required to Backup Withhold? Backup withholding applies to many payments reported on Form 1099-MISC. Some are: Box 1 = Rents Box 2 = Royalties Box 7 = Non-Employee Compensation (NEC)

34 When to begin Backup Withholding Backup withholding begins when aggregate payments for the calendar year equal or exceed $600*, or Immediately if: Payee was paid >$600 in prior year and an information return was issued, or Payee was subject to backup withholding in the prior year * $10 for Dividends and Interest

35 When to end Backup Withholding Failure to Furnish TIN: Backup withhold on payments until a completed Form W-9 is furnished Notice from IRS: Stop withholding when the IRS notifies you to stop

36 How to report Backup Withholding Report amounts withheld from vendors on Form 1099 (even for corporations) This applies even though the amount of the payment may be below the normal threshold for filing Form 1099 Provide copies to the IRS and the payee See Publication 1281 for more information

37 Form 945- Annual Return of Withheld Federal Income Tax Used to report backup withholding to IRS Annual return, due 1/31 of the following year Can deposit through EFTPS system See Form 945 instructions to determine your deposit schedule Make deposits separate from Form 941 deposits

38 Common Problems that prevent issuance of correct" or required information returns Failure to obtain identifying information before making payment Failure to aggregate payments from all expense codes or categories Assuming the payee is a corporation: Because name is Company or Associates Because an EIN is furnished An LLC

39 Common Problems (cont d) Remember - some corporate payments require Forms 1099 (medical & attorney) Where materials and services are provided, ensure proper inclusion of materials - see Proposed Treasury Regulation A- 1(a)(2)

40 Questions?

41 Contact me with Questions FSLG Specialist Todd Weidner (512)

42 Thank You!