|
As we
welcome in a new year and prepare for another tax compliance season,
we want to help you avoid unnecessary notices from the IRS. Now
more than ever, the IRS is trying to close the “tax gap”
by scrutinizing the matching of information—namely taxpayer
identification numbers (TINs). Before you begin preparing Forms
1099 for this filing season, please consider the rules regarding
Form W-9, which are discussed below.
We have also outlined the general requirements for filing Form 1099-MISC.
If we can assist you with the preparation of these or other documents
this filing season, please do not hesitate to contact our office.
Form W-9, Request for Taxpayer Identification Number
and Certification
Any business filing an information return, such as Form 1099, must
obtain the correct taxpayer identification number (TIN) for the
recipient. Failure to have records that match the IRS’s records
may result in mandatory “backup withholding”.
“Backup withholding” is required withholding of 28%
of any payments made to a payee, which must be submitted to the
IRS.
Backup withholding can be avoided by ensuring that all payees of
a business complete Form W-9. In certain cases, backup withholding
is required by the IRS. Therefore, it is important that Form W-9
be obtained for all payees to ensure they are exempt from this withholding
requirement.
Form 1099-MISC, Miscellaneous Income
Form 1099-MISC is used to report payments made in the course of
your trade or business. Personal payments do not require Form 1099-MISC.
Who should receive Form 1099-MISC? Any individual, business, estate,
or trust to whom you have paid the following:
- At least $10 in royalties or broker payments in lieu of dividends
or tax-exempt interest;
- At least $600 in rents, services, prizes and awards, or other
income payments;
- Any fishing boat proceeds;
- Gross proceeds to an attorney;
- Direct sales of at least $5,000 of consumer products to a buyer
for resale anywhere other than a permanent retail establishment;
or
- Any payments that required withholding of federal income tax
under the backup withholding rules.
The following
payments are not required to be reported on Form 1099-MISC, although
they may be taxable income to the recipient:
- Payments to corporations (except medical and health care payments,
fish purchases for cash, payments to attorneys, substitute payments
in lieu of dividends or tax-exempt interest, and payments by a
federal executive agency for services);
- Payments for merchandise, telegrams, telephone, freight, storage,
and similar items;
- Payments of rent to real estate agents;
- Wages paid to employees (report on Form W-2);
- Payments to former employees while on active duty (report on
Form W-2);
- Business travel allowances paid to employees (may be reportable
on Form W-2);
- Cost of current life insurance protection (report on Form W-2
or Form 1099-R);
- Payments to tax-exempt organizations including tax-exempt trusts,
the United States, any state, the District of Columbia, a U.S.
possession, or a foreign government; and
- Certain payment card transactions if a payment card organization
has assigned the merchant/payee a Merchant Category Code (MCC)
indicating that reporting is not required.
Form 1099-MISC is
due to the recipient no later than February 1st
(February 15th if amounts are reported in boxes 8 or 14). Form 1099-MISC
is due to the IRS no later than March 1st (March
31st if filing electronically). All paper forms submitted to the
IRS must include Form 1096.
Electronic filing is required if 250 or more Forms 1099-MISC are
being submitted. The following publications from the IRS’s
website are useful in obtaining information regarding electronic
filing:
For more information, see the related forms and instructions from
the IRS’s website:
To comply
with the requirements of IRS Circular 230, we must inform you that
the information discussed above is not intended or written to be
used, and cannot be used by the recipient or any other taxpayer,
for the purpose of avoiding penalties that may be imposed under
the Internal Revenue Code or any other applicable tax law, or to
promote, market or recommend to another party any transaction, entity,
investment plan, arrangement or other matter.
.
|
