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IRS Year-End Information Return Workshop (Forms 1099 & 1096)

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IRS Year-End Information Return Workshop (Forms 1099 & 1096). Presented by Mary Jo Audette Judy Pearson. What is a 1099 MISC Form?. A form used to report payments made by your tribe or tribal entity to non-employee workers, vendors, independent contractors, businesses and other payees.

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what is a 1099 misc form
What is a 1099 MISC Form?

A form used to report payments made by your tribe or tribal entity to non-employee workers, vendors, independent contractors, businesses and other payees

who should get a form 1099 misc
Who should get a Form 1099 MISC?
  • Subcontractors, vendors, non-employee workers and businesses who provided your business with a SERVICE (not goods, products or merchandise) or RENTS or PRIZES & AWARDS paid to non-employees,and
  • Payments total $600 or more for the year.
slide5
EXCEPTIONS:
  • Payments made to CORPORATIONS do NOT require a Form 1099.
    • Exceptions to the Corporation rule:
      • Payments made to MEDICAL corporations for medical or health services (e.g. physicals, drug testing, dental, vision, etc.) require a Form 1099 MISC.
      • Payments to LEGAL SERVICE corporations for ATTORNEY’S FEES and GROSS PROCEEDS paid to a legal services corporation require a Form 1099 MISC.
slide6
EXCEPTIONS continued:
  • Payment to GOVERNMENTAL ENTITIES: federal, state, city, borough, county, tribal, etc.
  • Payments to TAX EXEMPT ORGANIZATIONS
slide7
Examples of SERVICES normally requiring a Form 1099 MISC (if the business is not a corporation, government or tax exempt):
    • Accountants
    • Attorneys
    • Auditors
    • Bookkeeping services
    • Payroll services
    • Janitorial services
    • Consultants
    • Water & soil testers
    • Haulers
    • Garbage or refuse services
    • Environmental Consultants
    • Construction work
    • Remodelers (carpet installers, painters, drywallers, carpenters, etc.)
    • Doctors, Dentists, Chiropractors, etc.
    • Engineers
    • Day Care Services
    • Entertainers
    • Repairs (vehicle, office equipment, heavy equipment etc.)
    • Lodging
slide8
RENTS and leases of $600 or more per year for office space, office equipment, heavy equipment, vehicles, boats, etc.
  • RENTS paid directly to landlords on behalf of tribal members (e.g. rent assistance, students attending school, etc.)

(Rents paid to corporations or real estate agents do not have to be reported on a Form 1099 MISC.)

slide9
PRIZES & AWARDS of $600 or more

per year that are NOT for services

performed.

    • For example, drawings, door prizes and prizes paid to the winners of sporting & other events (snow machine races, dog sled races, fiddle contests, photography or art contests, prizes awarded for good grades) of $600 or more per year.
    • A non-cash prize that has a fair market value of $600 or more must also be reported on Form 1099 MISC. For example, a snow machine prize awarded that has a fair market value of $5000 must be reported as $5000 on Form 1099 MISC.
slide10
CAUTION:

If the prizes and drawings involved a wager (e.g. the winner had to buy a ticket to be eligible to win - raffles), that payment may be reportable on a different form—Form W-2G.

See Pub 3908, Gaming Tax Law for Indian Tribal Governments, for additional information on reporting and withholding requirements

what should not be reported on a form 1099 misc
What should NOT be reported on a Form 1099 MISC?
  • Any type of compensation paid toemployees (should be on a W-2). This includes commissions, bonuses, prizes, awards, cash payments, and market value of trips or other prizes given in contests to employees.
  • Tribal Council Member meeting stipends or any other type of compensation paid to Tribal Council Members for their work as tribal council members. Tribal Council members are considered employees and any payments made should be reported on Form W-2.
slide12
How do I determine if the businesses or individuals I paid are incorporated, tax exempt or a governmental entity?

Use Form W-9.

why is it a good idea to use w 9 s
Why is it a good idea to use W-9’s?
  • W-9 gives you all the information you need to fill out a Form 1099.
    • Name
    • Address
    • Taxpayer ID Number (Social Security Number or Employer ID Number)
    • Type of Entity - allows you to determine if a 1099 needs to be filled out—(remember, no need to send a Form 1099 to a governmental entity, tax exempt org. or corporation unless the payment to the corp. is for attorney’s fees, gross proceeds paid to any attorney or medical & health services).
slide16
CAUTION:

An LLC (limited liability company) may or may not be a corporation. An LLC is asked to designate its appropriate tax classification on Form W-9.

If the LLC has not marked a “C” or “S” after the LLC designation on Form W-9, and the payments to the LLC fit all the other criteria of who should get a Form 1099, a Form 1099 MISC should be filed.

slide18
Payments for SERVICES performed by non-employee workers or businesses are reported in:

Box 7: “Nonemployee compensation”

slide20
Regular fees paid to an attorney for legal services:

Box 7, “Nonemployee compensation”

However, report in Box 14, “Gross proceeds paid to an attorney”, payments made to an attorney, such as in a settlement agreement, where the attorney’s fees cannot be separated or identified from the total amount paid (gross proceeds).

slide22
Rent or lease payments:

Box 1, “Rents”.

slide24
Prizes & awards (including non-cash prizes such as snow machines & airline tickets,) that are not for services performed:

Box 3, “Other Income”

(Also include in Box 3 amounts paid to winners of drawings, races, sporting & other events, etc. that don’t involve a wager.)

slide26
Payments made to a supplier or provider of medical or health care services:

Box 6, “Medical and health care payments”.

slide28
Backup Withholding:

Box 4, “Federal income tax

withheld”.

when do i have to file forms 1099
When do I have to file Forms 1099?
  • The payee’s copy must be sent to him/her no later than January 31st.
  • Copy A of the Form 1099 must be sent to the Internal Revenue Service no later than the last day of February, usually the 28th. All Forms 1099 must be sent in to the IRS accompanied by the transmittal Form 1096.
  • NOTE: if you have 250 or more Forms 1099 to file, they must be filed electronically. You can file through the FIRE System (Federal Information Return Electronically System). See Pub 1220 and https://fire.irs.gov for more information
what is a form 1096
What is a Form 1096?

Form 1096, Annual Summary and Transmittal of US Information Returns, is a transmittal form that must accompany all Forms 1099 being submitted to the IRS. It summarizes all the information on the Forms 1099 being submitted.

are there penalties for not filing and for not furnishing forms 1099
Are There Penalties for Not Filing and for Not Furnishing Forms 1099?

YES – if you FAIL TO FILE a Form 1099 with the IRS and you cannot show reasonable cause, you may be subject to a penalty as follows:

slide34
Failure to File with the IRS by the last day of February (paper) or March 31st (electronically)
  • Failure to FileALL information
  • Failure to FileCORRECT information
  • Failure to report a TINor report an INCORRECT TIN
  • Failure to FileELECTRONICALLY when required to do so (250 or more information returns)
amount of penalty is based on when you file the correct return
Amount of penalty is based on WHEN you file the correct return:
  • $30 per info return if correctly filed within 30 days
  • $60 per info return if correctly filed more than 30 days after the due date but before August 1st
  • $100 per info return if filed after August 1stor do not file required info returns
slide36
If youFAIL to FURNISHa correct Form 1099 and you cannot show reasonable cause, you may be subject to a penalty as follows:
slide37
Failure to Furnishby JANUARY 31st
  • Failure to furnish ALL information
  • Failure to FurnishCORRECT information
  • Amount of penalty is based on WHEN you furnish the correct payee statement
  • Same timeframes & amounts as failure-to-filepenalties.
what are the most common mistakes made on forms 1099
What are the most common mistakes made on Forms 1099?
  • If the recipient or payee is an individual or sole proprietor, the individual’s NAME must go one the first name line, NOT THE BUSINESS NAME. This is true whether the Taxpayer’s ID Number (TIN) is an employer identification number or social security number. The business name can go on the second name line, if you wish.
slide39
Type the Forms 1099—do not hand write them.
  • Do not cut or separate the two forms per page when sending in Copy A to the IRS.
  • Only send Copy A to the IRS.
slide40
Do not staple or tape the forms together.
  • Do not fold the pages. Send in a large, flat envelope.
  • Only use the current year’s Form 1099. Old year’s forms must not be used.
  • No photocopies of the forms are acceptable.
slide41
Do not use dollar signs ($), ampersands (&), asterisks (*), commas (,), or other characters in the MONEY boxes. (10566.98 would be a correct entry in a MONEY box.)
  • Do not enter 0 (zero) or “none” in money amount boxes when no entry is required. Leave those boxes blank.
  • Do not use number signs (#). For example, use RT 2, not RT #2.
  • Do not omit the decimal point between the dollars and cents, e.g. 1000.00 is correct.
slide42
Make sure that the numbers and letters entered in the boxes of Form 1099 do not “run” into the sides of the boxes. The computer will not accurately read those numbers or letters. This can be a particular problem when 1099’s are run off using a computer and a printer.
slide44
Mark the “void” box only when you do not want the IRS to “read” a particular 1099.
    • For example, the top Form 1099 on the page is correct, but you make a typing error on the second. By marking “void” on the second 1099 on the page, the computer will read the top Form 1099 but will not read the one marked “void”.
slide46
You must use one Form 1096 for each type of Form 1099. In other words, all Forms 1099 MISC go with one 1096, all Forms 1099 INT would be sent with its own Form 1096.
slide47

X

X

slide48
Payer’s (or Filer’s) name and employer identification number should be:
    • the same on Form 1096 as they are

on individual Forms 1099.

    • consistentwith the name and number filed

on other IRS tax returns, e.g. Form 1120,

941, 940, etc.

slide49
Do not change the title of any box on any Form
    • If you are unsure of where to report data, call the information reporting call site at (866) 455-7438 (toll free).
slide50
Multiple Filings:
    • If, after you file Forms 1099, you discover additional forms to be filed, file these new forms with a new Form 1096.
    • Do NOT provide copies or information previously filed Forms 1099
slide51
If I have questions about reporting on Form 1099 and Form 1096, is there a toll-free number I can call?

Yes, you may call (866) 455-7438. The hours of operation are Monday through Friday from 8:30 am to 4:30 pm Eastern Time

(4:30 am to 12:30 pm Alaska Time). This toll-free number can be used for questions regarding any information returns (including W-2’s, W-3’s and W-2G’s) and also backup withholding.

slide52
FINAL NOTE:
  • Although, generally, you are not required to report paymentssmallerthan the minimum described for a Form 1099, you may prefer, for economy and your own convenience, to file Forms 1099 MISC for ALL previously discussed payments. The IRS encourages this.
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