Back to School Basics * Form 1099 MISC

Report
Back to School Basics – Form
1099 MISC
WELCOME
Back to School Basics - Form
1099 MISC
Agenda
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Purpose of Form 1099 MISC
Typical Recipients
Overview – Line by Line Detail
Filing Requirements
Purpose of Form 1099 MISC
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A record of income received from a business for services
rendered
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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
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Typically the relationship can be ended once the task is
completed
Form 1099 MISC Recipients
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Independent Contractor or “freelancer”
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Actors, novelists, freelance writers and other creative artists
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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 Recipients
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$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
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Payroll departments usually handle the “other income”
payments and nonemployee compensation
Audience
Poll – Does your business
hire Independent Contractors?
Overview – Line By Line Detail
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Payer’s Information
Identification Numbers
Recipient’s Information
Account Information
2nd TIN Not
Overview – Line By Line Detail
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Box 1 – Rents
Box 2 – Royalties
Box 3 – Other Income
 Prizes and awards
 FMV of merchandise from game shows or 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 Detail
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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 Detail
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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 Detail
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Box 7 – Nonemployee Compensation
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$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
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Non employee payment
Services in the course of the payer’s trade or business
Individual or partnership
$600 or more
Overview – Line By Line Detail
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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 Detail
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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 Detail
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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
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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
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Overview – Line By Line Detail
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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
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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 Requirements
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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)
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CP2100/2100A Notice
“B” Notice
Incorrectly Reported TIN by the payee
 Correct the data in the system, do not send B Notice
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Filing Requirements
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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
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Filing Requirements
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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 Requirements
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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 Requirements
**ELECTRONIC FILING IS NOT ACCEPTED ON
MAGNETIC MEDIA FOR 1099 MISC RETURNS**
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https://fire.irs.gov
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Test files can be submitted in advance to
http://fire.test.irs.gov
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 FOR ATTENDING!
JILLIAN ROBINSON, CPP
PENSOFT
(757) 873-1199
[email protected]

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