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I f tiInformationReportingReportingForms 1099Forms 1099
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Possible Required Information Return Reporting
Form Code Section1099-MISC 6041 6041A 6045(d) & (f)1099-MISC 6041, 6041A, 6045(d) & (f)
6050A, 6050N, 6050R1099 INT 6041 60491099-INT 6041, 60491099-R 408(i),6047(d)1099 G 6041 6050B 6050D 6050E1099-G 6041, 6050B, 6050D, 6050E
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Form 1099-INT, Interest Income,Section 6041 vs. Section 6049Interest is reportable under both code
sections • $600 or more §6041• $600 or more, §6041• $10 or more, §6049 (generally
applies to banks)However, Regulations § 1.6041-1(a), • If amount is to be reported under
§6049§6049, • Then not reported under §6041.
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Form 1099-INT (cont’d)Form 1099 INT (cont d)
• Interest payments made in course of trade or b i bj t t ti bbusiness are subject to reporting by persons including a governmental unit, international organization or any agency or instrumentalityorganization, or any agency or instrumentality
• Interest payments made to these units are exempt from reportingexempt from reporting
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Form 1099-G, Certain Government Payments
• Payments are separately reported for:• State or local income tax refunds, credits, or
ff t f $10 §6050Eoffsets of $10 or more, §6050E• Taxable grants of $600 or more, §6050D• Backup withholding, if applicable
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Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance gContracts, etc.
Governmental section 457(b) plansGovernmental section 457(b) plansBeginning in 2002, distributions from section 457(b) plans maintained by state or local457(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 2000-38, 2000-2 C.B. 174
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Form 1099-MISC, Miscellaneous Income• File this form if you have paid (in the course of your trade y p ( y
or business):• $10 or more in royalties or broker payments in lieu of
di id d t t i t tdividends or tax-exempt interest• $600 or more
• Rents• Rents • Services • Prizes or awards • Medical or legal payments• Gross proceeds to an attorney
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Items not Reported on Form
P t t ti
p1099-MISC
• Payments to a corporation • Exceptions- attorney fees &
medical payments (including p y ( gpayments to vets for FFA)
• Payments for merchandise only• Payments of rent to RE agents• Payments of rent to RE agents• Scholarships• Certain payment card transactions • Payments to tax-exempt
organizations, the U.S., states, and political subdivisionspolitical subdivisions
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Items not Reported on Form1099-MISC
• Wages to employeesg p y• Payments to employees;
such as fringe benefits or l i btravel reimbursements
(Note: if paid as part of a non accountable plan thennon-accountable plan, then travel reimbursements and auto expenses should be included in wages and reported on W-2)
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Recipient Information
• Recipient Namep• Show full name and
address• Sole proprietors
• Individual’s name on first linefirst line
• DBA may be entered on second name line
• For TIN either SSN or EIN
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Form 1099-MISCBox 1 - Rents
• Real estate rentals(unless paid to real estate agent)(unless paid to real estate agent)
• Machine rentalsS f R lti ( t l f t )• Surface Royalties (rentals of pasture)
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Form 1099-MISCBox 2 - Royalties
• In Box 2 report oil and gas royalties of $10 or more
• Use of scripts for one t l ?act plays?
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Form 1099-MISCBox 3 - Other Income
• Other income not reportable elsewhere• Prizes and awards not for services performedPrizes and awards not for services performed
or paid to employees • Various damage payments g p y• 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
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Form 1099-MISCBox 4 – Income Tax Withheld
BackupBackup withholding
Current rate is 28%28%
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Form 1099-MISC – Box 6Medical and Healthcare Payments• Report payments to• Report payments to
individuals, partnerships, and corporationsp
• Medical payments include doctor fees, drug testing, lab f h i l th tfees, physical therapy, etc.
• Not required to report payments to pharmaciespayments to pharmacies
• Vets provide a “medical service”
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Form 1099-MISC - Box 7Nonemployee Compensation
• Payment for services (should include parts or materials)
• Professional service fees – ex. attorneys (including corporations), architects and
t taccountants • Prizes and awards for services performed as a
lnonemployee
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Form 1099-MISC.- Box 14Gross Proceeds Paid to an Attorney
• Defining Gross Proceeds• Payments made to an
tt t f l lattorney as part of a legal settlement or court orderPayment may be issued in• Payment may be issued in the names of the attorney and the clientand the client
• May include an amount for the attorney’s servicesthe attorney s services
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Form 1099Form 1099Void 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 p y
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Form 1099 Adobe crobat DocumeForm 1099
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 forms (up to 249)p p ( p )
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Form 1099 Due DatesT R i i t J 31st• To Recipient - January 31st
• To IRS, if filed on paper, by February 28th
With Form 1096 Annual Summary and• With Form 1096, Annual Summary and Transmittal of U.S. Information Returns
• If filed electronically March 31st• If filed electronically- March 31st
**Form 4804, Transmittal of Information Returns, is no longer requiredis no longer required
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Who must file electronically?y
• If you are required to file 250 or more information y qreturns, you must file on electronically*
• Filing requirement applies separately • To each type of form • To originals and corrections g
* You may choose to file electronically even if you are filing less than 250 formsare filing less than 250 forms.
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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 to1099-MISC, complete one Form 1096 to transmit Forms 1099-R and another for Forms 1099-MISC.
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Furnishing Form 1099 to Payee Electronically
• Consent• Format
P ti• Posting• Notice• Undeliverable electronic address• Undeliverable electronic address• Retention
• Refer to Publication 1179, General Rules and Specifications for Substitute Forms, for more i f tiinformation
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Information Return Penalties
IRC Section 6721 – Failure to File Correct Information ReturnsInformation Returns
May be subject to penalties if:May be subject to penalties if: • Fail to file timely
Fail to include all information required to be• Fail to include all information required to be shown on a return
• Include incorrect information on a return• Include incorrect information on a return • File on paper when you were required to file
electronicallyelectronically
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Information Return Penalties
Reduction in penalty if:
• Correctly filed by March 30- $30 per returny y• 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
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Information Return PenaltiesIRC Section 6722 – Failure to Furnish correct
Payee StatementsPayee Statements
Subject to penalties if:Subject to penalties if:• Failure to furnish by January 31st• Failure to include all required informationFailure to include all required information• Include incorrect information
Same reductions apply
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Form W-9, Request for Taxpayer Identification Number and CertificationCertification
Purpose of formPurpose 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 versionMay use substitute version• May incorporate into other business forms
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Form W-9, Request for Taxpayer , q p yIdentification Number (TIN) and CertificationCertification
• Sole proprietor can use both SSN or EIN – but SSN h ld b t h d ith th i di id l’a SSN should be matched with the individual’s
name on name lineC ti t hi & t t EIN• Corporations, partnerships & estates - use EIN• Enter business name as shown on required
Federal tax documents on “Name” lineFederal tax documents on Name line• Can enter DBA or business name on
“Business Name” lineBusiness Name line
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LLC and Reportable Payments
• An LLC (Limited Liability Company) may be
p y
( y p y) ytaxed as either a sole proprietorship (disregarded entity), a partnership, or a corporation
• Obtain a Form W-9 from the payee to d t i th tit ’ t tdetermine the entity’s status
• Name must match with TIN • Certify TIN is correct
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TIN Matching Programg g
TIN t hi ll• TIN matching programs allow payers or authorized agents who submit Forms 1099-INT, DIV, PATR, OID, MISC, or B, the capability ofDIV, PATR, OID, MISC, or B, the capability of submitting an online taxpayer identification (TIN) and name combination to be matched against IRS recordsIRS records
• Matching can be completed prior to filing i f ti tinformation returns
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TIN Matching Programg g
• Payer must also have filed these formsPayer must also have filed these forms during the prior 2 years
• System allows user to input TIN/Name y pcombination and the system matches against master files
• Accessible through IRS website: www.irs.gov/taxpros
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Are you required to Backup y q pWithhold?
Backup withhold if:Backup withhold if:1. You make reportable
payments to persons (or p y p (corporations) who have not furnished their valid TIN or,
2. IRS notifies you to begin withholding
Withholding rate has been 28% since 2003since 2003
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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)
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When to begin Backup Withholding
• Backup withholding begins when p g gaggregate payments for the calendar year equal or exceed $600*, or$600 , or
• Immediately if:• Payee was paid >$600 in prior
d i f ti tyear and an information return was issued, or
• Payee was subject to backup y j pwithholding in the prior year
* $10 for Dividends and Interest
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When to end Backup Withholdingp g
• Failure to Furnish TIN:• Backup withhold on
t til l t dpayments until a completed Form W-9 is furnished
Notice from IRS:• Notice from IRS:• Stop withholding when the
IRS notifies you to stopIRS notifies you to stop
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How to report Backup Withholding• Report amounts withheld from vendors on Form
1099 (even for corporations)( p )• This applies even though the amount of the
payment may be below the normal threshold for fili F 1099filing Form 1099
• Provide copies to the IRS and the payeeS P bli ti 1281 f i f ti• See Publication 1281 for more information
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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
d itdeposits
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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
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Common Problems (cont’d)( )
• Remember - some corporate payments require Forms 1099 (medical & attorney)
• Where materials and services are provided,Where materials and services are provided, ensure proper inclusion of materials - see Proposed Treasury Regulation § 1.6041A-1( )(2)1(a)(2)
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Questions?Questions?
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Contact me with Questions
• FSLG SpecialistFSLG Specialist
T dd W idTodd Weidner(512) 499-5285
Todd R Weidner@irs [email protected]
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Th k Y !Thank You!