Tag Archives: 1099

IRS Changes That May Delay Your Early Refund

In an effort to reduce the amount of money paid to identity thieves who file fraudulent returns, the IRS will be implementing changes in the timing and way they handle the processing of tax returns.

These steps will continue to evolve, but recent changes will impact millions who depend on receiving an early refund.

Earlier filing of form W-2s and 1099-MISC – The timing required to send these forms to employees and vendors remains the end of January. However, the extended deadline for filing the electronic version of these forms to the IRS and Social Security Administration is now a full month earlier. This is done to allow the IRS to match records with early filed tax returns. The prior timing gap was ideal for thieves to file fraudulent tax returns.

Earned Income Tax Credit and Additional Child Tax Credit – If you file a tax return that contains either of these credits, do not expect to receive an early refund. The IRS has been mandated to hold these refund payments until February 15th or later. Given the payment backlog this will create, it is still important to file early to get your refund in the queue.

Begin planning now to be prepared for these upcoming changes. Rest assured, we can all look forward to further changes as the IRS continues to address the multi-billion dollar identity theft problem plaguing the Agency.

1099 Filing Requirements

Another year has come to an end and we would like to take the time to remind you of Form 1099 reporting requirements and changes to filing deadlines.

Certain payments made in the course of business are required to be reported on the appropriate Form 1099.  The type of 1099 filed depends on the type and amount of the business expenditure.  Some of the most common expenditures requiring a 1099 are listed below:

Payments for: Equal to or Exceeding: Form:
Dividends $  10 1099-DIV
Interest (generally) $  10 1099-INT
Royalties $  10 1099-MISC
Liquidating distributions $600 1099-DIV
Interest (paid in the course of business) $600 1099-INT
Fees paid for services $600 1099-MISC
Commissions $600 1099-MISC
Prizes and awards $600 1099-MISC
Rents $600 1099-MISC

Note: Generally, payments made to a corporation are not required to be reported on a form 1099.  However, there are some exceptions such as attorney fees.

A copy of the 1099 is required to be postmarked to the recipient and the IRS by January 31, 2017. Failure to correctly file the required 1099’s within the due dates can result in penalties of up to $260 per return (based on when filed) with a maximum of $1,059,500 for each year.

In addition to the above mentioned requirements, business taxpayers will be required to answer two questions on their 2016 income tax returns: (1) Did you make any payments in 2016 that would require you to file Form 1099(s)? (2) If yes, did you file the required Form 1099(s)?

In order to properly fill out the required forms, you will need to obtain information from each person to whom you make qualifying payments. Form W-9 is used for this purpose and can be obtained by going to http://www.irs.gov/pub/irs-pdf/fw9.pdf.

The information above relates to the most common types of transactions and circumstances.

Twelve Common Snags to Finalizing Your Tax Return – Part 1

The goal for every taxpayer is to have their return filed quickly and without error.  Here’s the first half of a handy list of items that are often overlooked and can cause all sorts of delays.

Review your tax return and return your signed eFile forms – Your tax returns can’t be filed until you have reviewed them and returned the signed eFile forms to your preparer. The sooner you do this, the sooner you’re filed.

Having proof of health insurance – You should receive a Form 1095 confirming you have health insurance. However, if your employer is one of those that received approval to send a delayed form, you still need to provide your preparer with proof of insurance before filing.

Missing W-2 and/or 1099 – One missing income form and the next thing you know, you’re paying to file an amended. Using last year’s tax return, or a tax organizer provided by your preparer, make sure all prior W-2’s and 1099’s are received and provided to your tax preparer.

Incorrect information on a W-2 or 1099 – Always double-check your forms to make sure the information is accurate – one wrong spelling of a name or one digit off on your SSN and the filing process comes to a screeching halt. Make sure 1099 income is in the correct box. Are you receiving rents and receive a 1099-MISC with the amount in the Non-Employee Compensation box? Then you face a choice – either try to get the form corrected or delay filing your tax return.

Missing or invalid Social Security Number – This one is sort of a given – if you don’t have a valid SSN, there will be no tax filing.

Dependent already claimed – Share joint custody of a child? Or, did your college student think they could file claiming themselves? Your return cannot be filed if there is a conflict in this area. Make sure it’s clear who gets to claim the dependents in your life.

Look for the second part of this article next week!

1099’s and You

Have you paid anyone at least $600 in the course of your trade or business? If so, then you may be required to issue them a 1099-MISC and file a form 1096 with the IRS. You don’t need to issue 1099’s for payments made for personal purposes or to corporations. You’ll send this to any individual, partnership, LLC, Limited Partnership or Estate.

When sending out (or having your accountant send them out for you) 1099’s, you will want to make sure that you have:

  • Form W-9 for each payee (can be downloaded from the IRS website)
  • The amount you paid them over the entire year
  • IRS printed copy of Form 1099 and Form 1096 (can be ordered from the IRS website or, while supplies last, from your local post office)

1099’s also have a deadline of January 31 for when they need to be issued and mailed to each payee. Form 1096 needs to be sent to the IRS before February 28th.

So, as January comes to a close make sure that you have your information together and get your forms out – or be ready to pay the penalties for not sending them out.