Tag Archives: filing

Twelve Common Snags to Finalizing Your Tax Return – Part 2

Last week we gave you the first half of a list of items that are often overlooked that cause trouble in filing a timely tax return.  Here’s the second half of the list!

Name mismatch – If you’ve recently married or divorced, make sure your last name on your tax return matches the one on file at the Social Security Administration.

Inconsistent information – Most tax preparation software will check a tax return for inconsistencies. The message “Diagnostic Error!” will make you cringe. When one occurs, they must be resolved prior to filing your tax return. An example might be you filing Married Filing Separate, while your soon-to-be ex-spouse files as Married Filing Joint or Single.

No information for a common deduction – If you claim a deduction, you will need to provide support to document the claim.

Missing cost information for transactions – Brokers send out their statements with the sales transactions. You will need to also provide the cost and purchase information (cost basis) or the tax return cannot be filed.

Missing K-1 – If you have ownership of a partnership, Sub Chapter S or LLC, you should receive a Form K-1 that reports your share of the profit or loss from the business activity.  Without this K-1, you cannot file your tax return.

Forms with no explanation – If you receive a tax form, but have no explanation for the form, questions arise.  For instance, if you receive a retirement account distribution form, it may be deemed income. If it is part of a qualified rollover, no tax is due.  An explanation is required to file your information correctly.

Hopefully, by knowing these common missing pieces of information, you can prepare to have your tax filing process a smooth one!

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!