Tax-Exempt Organizations: How to Comply with 1099 Reporting Requirements CLAconnect.com
Disclaimers To ensure compliance imposed by IRS Circular 230, any U. S. federal tax advice contained in this presentation is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed by governmental tax authorities. The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting, or tax advice or opinion provided by CliftonLarsonAllen LLP to the user. The user also is cautioned that this material may not be applicable to, or suitable for, the user s specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The user should contact his or her CliftonLarsonAllen LLP or other tax professional prior to taking any action based upon this information. CliftonLarsonAllen LLP assumes no obligation to inform the user of any changes in tax laws or other factors that could affect the information contained herein.
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About CliftonLarsonAllen A professional services firm with three distinct business lines Wealth Advisory Outsourcing Audit, Tax, and Consulting 3,600 employees Offices coast to coast Public Sector practice serves 6,300 clients Nonprofit State and local government Higher education
Speaker Introductions Karen Gries As a principal with CLA, Karen provides tax compliance and consulting services to exempt organizations. Karen s experience includes working with governmental entities, charities, foundations, social welfare, business leagues and associations, colleges and universities, health care providers, religious organizations, and others. Judy Enders Judy is a manager with CLA with more than 23 years of accounting experience. In addition to serving our public sector practice, July has served as an adjunct business and accounting instructor at the Minnesota School of Business and has been a contributing author in local business journals, Accounting Today and Accounting Technology magazines.
Learning Objectives At the end of this session, you will be able to: Understand the different types of 1099 forms which may be issued to payees Identify the recipients and various payments which are required to be reported Apply practical information to help address unique issues associated with the filing requirements within the tax-exempt sector
Agenda Overview of 1098 and 1099 Reporting Requirements Who is Required to File Obtaining the Information Required to File Detailed Requirements for Form 1099-Misc Q&A 7
Overview 1099 reporting provides two important functions Notifies the IRS of payments made to vendors Provides notice to the vendor of total annual payments Any entity conducting a trade or business is required to file Form 1099 Individuals Partnerships Nonprofit organizations Estates Trusts Medical and attorney corporations 8
Overview (cont.) 1098-T (tuition) reporting is required if you are: Eligible education institution College University Vocational school Other postsecondary school 1098-C is required: For each contribution of a qualified vehicle Motor vehicles, boats, airplanes Claimed value of greater than $500 9
Examples of Reportable Payments Entities must file 1099 s if they have paid: $10 or more in royalties or dividends $600 or more in: Rents Office space Parking space Equipment Non-employee compensation (services) Advertising Custodial/maintenance Professional fees Appraisers Consultants 10
Non-Reportable Payments Do not issue 1099 s for: Payments to employees (e.g., fringe benefits, travel reimbursements, etc.) Products Workmen s compensation Storage Utilities Payments to governmental agencies Corporations 11
Obtaining Vendor Information CLAconnect.com 12
Obtaining Vendor Information Form W-9 Provide to every vendor who performs services for your entity Used to obtain an identifying number of a vendor Identifies the type of business Sole proprietor LLC Corporation Partnership 13
Form W-9 14
Form W-9 (cont.) Provides the identifying number for the vendor Sole proprietor uses Social Security Number (SSN) Corporations, partnerships and estates use Employer Identification Number (EIN) LLC Name must match with SSN or EIN An LLC can be treated as a sole proprietor, partnership or corporation DO NOT assume that LLC in the business name means that you do not have to file a Form 1099 Certifies that the Taxpayer Identification Number (TIN) is correct Taxpayer certifies that they are not subject to backup withholding or exempt 15
TIN Matching Program Allows payers or authorized agents who submit forms 1099-INT, DIV, PATR, OID, MISC and B the capability of submitting an online Taxpayer Identification Number and name combination to be matched against IRS records 16
TIN Matching Program (cont.) Available 24 hours per day, 7 days per week Access IRS TIN matching by visiting e-services at www.irs.gov/individuals/e-services-registration Registration is required for this service Contact e-services 1-866-255-0654 7:30 a.m. to 7 p.m. EST, Monday - Friday 17
TIN Matching Program (cont.) Verifying SSN s Verify up to five SSN s by calling the Social Security Administration (SSA) Verify up to 50 by writing to the SSA See SSA website for more information www.ssa.gov/employer/ssnv 18
Form 1099 - Misc CLAconnect.com 19
Form 1099-Misc Rents Box 1 Real estate rentals (unless paid to real estate agent) Equipment rentals Rental assistance payments made to owners of housing projects 20
Form 1099-Misc (cont.) Royalties Box 2 Report royalties of $10 or more Other Income Box 3 Prizes and awards that are not for services performed Various damage payments Excess mileage reimbursement over 14 cents per mile for volunteer drivers 21
Form 1099-Misc (cont.) Medical and Healthcare Payments Box 6 Report payments to individuals, partnerships, and corporations Medical payments include doctor fees, drug testing, lab fees, physical therapy, etc. DO NOT report payments to pharmacies or tax exempt hospitals 22
Form 1099-Misc (cont.) Non-Employee Compensation Box 7 Professional service fees to attorneys (including corporation), accountants, consultants, etc. Prizes and awards for services performed as a non-employee Payment for services to persons who are not employees 23
Form 1099-Misc (cont.) Employees Factors that indicate workers are NOT contractors: Required to wear uniforms Required to work certain hours Worker doesn t advertise for customers Entity provides training Office space, supplies and materials provided by the entity Stands no risk of loss 24
Are you required to backup withhold? You are required to backup withhold if you make reportable payments to persons or entities who have not furnished a valid TIN Withholding is 28% Begins when aggregate payments for the calendar year reach $600 Begins immediately if the payee was subject to backup withholding in the prior year 25
Reporting backup withholding? Include amount withheld in Box 4 of form 1099-Misc Form 945 is used to report and pay backup withholding to the IRS Due date of January 31 Ordinary withholding deposit rules apply Do not include 945 deposits with your 941 deposits 26
Who Must File Electronically Use IRS e-file if you file 250 or more information returns Requirement applies separately to each type of form Requirement applies separately to originals and corrections You may choose to file electronically even if you are not required to 27
Due Dates Form 1098-C Contribution of motor vehicles, boats, airplanes 1098-T Tuition and related expenses Due Date Recipient 30 days from date of sale or contribution Due Date IRS February 28* January 31 February 28* 1099 January 31 February 28* *The due date is March 31 if filed electronically 28
Penalties Failure to file by due date Filed by March 30 $15 per return Filed after March 30, but prior to August 1 $30 per return Filed after August 1 $50 per return Failure to furnish to payee $50 per statement 29
How CLA can help CLA Outsourcing Assist with W-9 process Review vendor expense activity to identify 1099 recipients Assist with the preparation of 1099 forms E-File 1099 forms Review and establishment of policies and procedures related to compliance Mock IRS audits 30
Questions? Karen Gries, Principal karen.gries@claconnect.com Judy Enders, Manager judy.enders@claconnect.com CLAconnect.com twitter.com/ CLAconnect facebook.com/ cliftonlarsonallen linkedin.com/company/ cliftonlarsonallen 31