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Back to School Basics – Form 1099 MISC. Welcome. Back to School Basics - Form 1099 MISC . Agenda Purpose of Form 1099 MISC Typical Recipients Overview – Line by Line Detail Filing Requirements. Purpose of Form 1099 MISC.

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Back to School Basics – Form 1099 MISC


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back to school basics form 1099 misc1
Back to School Basics - Form 1099 MISC

Agenda

Purpose of Form 1099 MISC

Typical Recipients

Overview – Line by Line Detail

Filing Requirements

purpose of form 1099 misc
Purpose of Form 1099 MISC

A record of income received from a business for services rendered

Cost-cutting alternative for companies needing specific tasks completed

Non-employee compensation means no company paid taxes

No need to provide benefits or offer employee incentives

No risk of investment loss to the company

Typically the relationship can be ended once the task is completed

form 1099 misc recipients
Form 1099 MISC Recipients

Independent Contractor or “freelancer”

Actors, novelists, freelance writers and other creative artists

Also used to report income from the following :

At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest

Gross proceeds of $600 or more paid to an attorney

Fishing boat proceeds

$600 or more in Rents, services, prizes and awards

form 1099 misc recipients1
Form 1099 MISC Recipients

$600 or more in medical and health care payments, crop insurance proceeds, cash payments for fish

$600 or more in cash paid from a national principal contract to an individual, partnership, or estate

$600 or more in other income payments

direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment.

overview line by line detail
Overview – Line By Line Detail

Payroll departments usually handle the “other income” payments and nonemployee compensation

  • Audience Poll – Does your business hire Independent Contractors?
overview line by line detail1
Overview – Line By Line Detail

Payer’s Information

Identification Numbers

Recipient’s Information

Account Information

2nd TIN Not

overview line by line detail2
Overview – Line By Line Detail

Box 1 – Rents

Box 2 – Royalties

Box 3 – Other Income

Prizes and awards

FMV of merchandise from game showsor sweepstakes

Punitive Damages

Compensatory damages for non-physical injuries or sickness

Damages received for emotional distress

Physical symptoms from emotional distress reportable

Damages received due to emotional distress from physical injuries or sickness NOT reportable

overview line by line detail3
Overview – Line By Line Detail

Payments of a deceased employee’s wages

Estate or Beneficiary

Payments of Indian gaming profits or to Tribal Members

Termination payments to self-employed insurance salespeople

Box 4 – Federal Income Tax Withheld

Backup Withholding

Box 5 – Fishing Boat Proceeds

overview line by line detail4
Overview – Line By Line Detail

Box 6 – Medical and Health Care Payments

$600 or more to physicians and medical/health care service providers

Includes payments made by medical and health care insurers under health, accident and sickness insurance programs

No requirement to report payments to pharmacies for prescription drugs

*Corporation exemption applies when payments made to a health care provider are done through a credit or debit card in an FSA, HRA or HSA.

overview line by line detail5
Overview – Line By Line Detail

Box 7 – Nonemployee Compensation

$600 or more

Fees, commissions, prizes and awards for services performed

Expenses incurred for the use of an entertainment facility

Federal executive agencies

Conditional Guidelines

Non employee payment

Services in the course of the payer’s trade or business

Individual or partnership

$600 or more

overview line by line detail6
Overview – Line By Line Detail

Box 7 common examples

Professional Service Fees

Referral Fees

Fees and travel reimbursement not accounted to the payer if the fee and reimbursement total is at least $600 or more

Non-employee entertainers for services

Taxable Fringe Benefits to nonemployees

Directors fees

Nonqualified deferred compensation (409A)

overview line by line detail7
Overview – Line By Line Detail

Box 8 – Substitute Payments in Lieu of Dividends or Interest

Definition of “Substitute Payment” means a payment in lieu of:

Tax-exempt interest that has accrued while a short sale was open

and

A dividend if the ex-dividend date is after the transfer of stock for use in a short sale and before the closing of the short sale

overview line by line detail8
Overview – Line By Line Detail

Box 9 – Payer Made Direct Sales of $5,000 or More of Consumer Products to a Buyer (Recipient) for Resale

Enter X if applicable

Do not enter a dollar amount

Box 10 – Crop Insurance Proceeds

Boxes 11 and 12 – Foreign Tax Paid and Foreign Country or US Possession (For 2013)

Box 13 – Excess Golden Parachute Payments

Box 14 – Gross Proceeds Paid to an Attorney

overview line by line detail9
Overview – Line By Line Detail

Box 15a – Section 409A Deferrals

Box 15b – Section 409A Income

Amounts considered subject to a substantial risk of forfeiture are not included

Also reported in Box 7

Box 16 – State Income Tax Withheld

Box 17 – State/Payer’s State Number

Box 18 State Income

filing requirements
Filing Requirements

TIN (Tax Identification Number)

What is a TIN

When is a TIN required

Missing or Incorrect TIN

Not provided

Less than 9 digits

Mixture of digits and numbers

filing requirements1
Filing Requirements

IRS 1099 TIN Matching Process

TIN’s are matched against two files:

All SSN’s issued by the SSA

All IRS assigned employer identification numbers (EINs)

CP2100/2100A Notice

“B” Notice

Incorrectly Reported TIN by the payee

Correct the data in the system, do not send B Notice

filing requirements2
Filing Requirements

Provided TIN and Name Control do not match

Send B Notice to payee

Procedure when a TIN is not Provided

Backup Withholding @ 28%

W-9

Report withholding on Form 945- Annual Return of Federal Income Tax Withheld

filing requirements3
Filing Requirements

When to File 1099 MISC

Reporting Period

February 28th of the following Tax Year

Form 1096

Must be properly addressed and mailed by the due date to be considered timely

Holidays and Weekend due dates

filing requirements4
Filing Requirements

Electronic Reporting

Automatic Extension of 1 month

Must be reported via Filing Information Returns Electronically (FIRE) system

250 or more forms

Recordkeeping Requirement

3 years from the due date of the returns

4 years from the due date of the returns if backup withholding was imposed

filing requirements5
Filing Requirements

**Electronic filing is not accepted on Magnetic Media for 1099 MISC Returns**

https://fire.irs.gov

Test files can be submitted in advance to

http://fire.test.irs.gov

references
References

http://www.irs.gov/pub/irs-pdf/i1099msc.pdf - Instructions for Filing Forms 1099 MISC

http://www.irs.gov/pub/irs-pdf/f1099msc.pdf - Form 1099 MISC

http://www.irs.gov/pub/irs-pdf/p1220_11.pdf - Publication 1220, Specifications for Filing Forms 1099 electronically

thank you
Thank You

Thank you for attending!

Jillian Robinson, CPP

PenSoft

(757) 873-1199

jrobinson@pensoft.com