Form 1099: The Do It All Form

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Form 1099 is the all-purpose player for the Internal Revenue Service. The form is used for many ordinary reporting items:

  • Rental
  • Earnings for non-employee services
  • Pension and IRA distributions
  • Interest and dividends

The key to the form, make sure you file it. Every business tax return has a question which asks if you have filed all 1099’s which were required to be filed. Not sure who would answer no to this question, but the Service is serious about yoking the threat of penalties on US business to get more income reporting forms filed. A few quick general issues to consider:

  • W2 and 1099: There is no instance where a W2 employee would also get a 1099. No the income threshold limit does not apply in this instance. No an employee cannot also have other non-employee earnings that shouldn’t have already been included in the W2. No bonuses cannot be put on a 1099 they must run through the W2.
  • Non-employee earnings vs Other income: If you are paying someone to work for your business and you are using any of the up to date accounting systems to run your business, make sure the non-employee/contractor is getting a 1099 for Non-employee earnings. The difference between Other Income and Non-employee earnings? Non-employee earnings is subject to FICA tax when they report the income on their personal return. Other Income does not require FICA tax on those earnings. (Technically it’s self-employment tax and not FICA, but it’s really the same thing).
  • Thresholds: If you are already running one 1099 for a contractor, stop stressing over the threshold limit and run it for everyone. What’s your downside, over-reporting? Allowing someone to not pick up income? Although the income does not have to be reported on a 1099, the recipient still has a responsibility for reporting it on their personal return.
  • Penalties: The penalty for failure to file a 1099 is $100 per payee statement. File everyone and don’t worry about a penalty. The penalty is the lesser worry, the bigger worry is the cost of scrutiny on your business practices and income tax returns the 1099 audit could cause. Even if the entire return is correct, the direct and intangible costs of an audit is worth avoiding.

The 1099 reporting season will be upon us soon. If you want us to assess how we can help you conform to the reporting requirement, please call us soon at 314-993-4285 so we can reserve time in our schedule.

Health Care Information Reporting: Seven Things Employers Can Think About Now

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If your organization is an applicable large employer, you must report information about the health care coverage you offered to your full-time employees. As an employer, it’s not too early to start thinking about these seven facts related to your information reporting responsibilities under the health care law.

  1. The health care law requires ALEs to report information about health insurance coverage offered to its full-time employees and their dependents as well as to the IRS.
  2. ALEs must report information about themselves, the coverage they offered – if any – and the individuals covered under the policy.
  3. ALEs are required to furnish a statement to each full-time employee that includes the same information provided to the IRS by January 31, 2017.
  4. ALEs that file 250 or more information returns during the calendar year must file the returns electronically.
  5. ALEs must file Form 1095-C, Employer-Provided Health Insurance Offer and Coverage with the IRS annually, no later than February 28, 2017 or March 31, 2017 if filed electronically. Forms 1095-C are filed accompanied by the transmittal form, Form 1094-C.
  6. Self-insured employers that are applicable large employers, and therefore are also subject to the information reporting requirements for offers of employer-sponsored health insurance coverage, must combine reporting under both provisions by filing a single information return, Form 1095-C, and transmittal, Form 1094-C.
  7. The ACA Assurance Testing System opened November 7, 2016 for tax year 2016 testing. Software developers – including employers and issuers who passed AATS for tax year 2015 – will not have to retest for tax year 2016; the Tax Year Software Packages will be moved into Production status. New participants need to comply with test requirements for tax year 2016. For more information, see Publication 5165, Guide for Electronically Filing ACA Information Returns for Software Developers and Transmitters.

Applicable large employers can find a complete list of resources and the latest news at the Applicable Large Employer Information Center. 

If you have any questions please do not hesitate to give us a call at our office, 314-993-4285.

This information was received from IRS Tax Tips Issue Number: HCTT 2016-75.

New Law Sets Jan. 31 W-2 Filing Deadline; Some Refunds Delayed Until Feb. 15

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A new federal law moves up the W-2 filing deadline for employers and small businesses to Jan. 31. The new law makes it easier for the IRS to find and stop refund fraud. It also delays some taxpayer refunds. Those taxpayers claiming the Earned Income Tax Credit or the Additional Child Tax Credit won’t see refunds until Feb.15, at the earliest.

Here are some key points to keep in mind:

  • Protecting Americans from Tax Hikes (PATH) Act. Enacted last December, the new law means employers need to file their copies of Forms W-2  by Jan. 31. These forms also go to the Social Security Administration. The new deadline also applies to certain Forms 1099. Those reporting nonemployee compensation such as payments to independent contractors submitted to the IRS are due Jan. 31. Employers have long faced a Jan. 31 deadline in providing copies of these forms to their employees. That date won’t change.
  • Different from past deadline. Employers normally had until the end of February, if filing on paper, or the end of March, if filing electronically, to send in copies of these forms. The IRS is working with the payroll community and other partners to spread the word.
  • Helps stop fraud or errors. The new Jan. 31 deadline will help the IRS to spot errors on returns filed by taxpayers. Having these W-2s and 1099s sooner will make it easier for the IRS to verify legitimate tax returns and get refunds to taxpayers eligible to receive them. The changes will allow the IRS to send some tax refunds faster.
  • Some refunds delayed. Certain taxpayers will get their refunds a bit later. By law, the IRS must hold refunds for any tax return claiming either the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) until Feb. 15. This means the whole refund, not just the part related to the EITC or ACTC.
  • File tax returns normally. Taxpayers should file their returns as they normally do. The IRS issues more than nine out of 10 refunds in less than 21 days. However, some returns may need further review. Whether or not claiming EITC or ACTC, the IRS cautions taxpayers not to count on getting a refund by a certain date. Consider this fact when making major purchases or paying debts.
  • Use IRS.gov online tools. Starting Feb. 15, the best way to check the status of a refund is with the Where’s My Refund? tool on IRS.gov.

Taxpayers should keep a copy of their tax return. Beginning in 2017, taxpayers may need their Adjusted Gross Income amount from a prior tax return to verify their identity. They can get a transcript of their return at www.irs.gov/transcript.

If you have any questions please do not hesitate to give us a call at our office, 314-993-4285.

This information was received from IRS Special Edition Tax Tip Issue Number: 2016-16.

Nine Tips on Deducting Charitable Contributions

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Giving to charity may make you feel good and help you lower your tax bill. The IRS offers these nine tips to help ensure your contributions pay off on your tax return.

  1. If you want a tax deduction, you must donate to a qualified charitable organization. You cannot deduct contributions you make to either an individual, a political organization, or a political candidate.
  2. You must file Form 1040 and itemize your deductions on Schedule A. If your total deduction for all non-cash contributions for the year is more than $500, you must also file Form 8283, Non-cash Charitable Contributions, with your tax return.
  3. If you receive a benefit of some kind in return for your contribution, you can only deduct the amount that exceeds the fair market value of the benefit you received. Examples of benefits you may receive in return for your contribution include merchandise, tickets to an event, or other goods and services.
  4. Donations of stock or other non-cash property are usually valued at fair market value. Used clothing and household items generally must be in good condition to be deductible. Special rules apply to vehicle donations.
  5. Fair market value is generally the price at which someone can sell the property.
  6. You must have a written record about your donation in order to deduct any cash gift, regardless of the amount. Cash contributions include those made by check or other monetary methods. That written record can be a written statement from the organization, a bank record, or a payroll deduction record that substantiates your donation. That documentation should include the name of the organization, the date and amount of the contribution. A telephone bill meets this requirement for text donations if it shows this same information.
  7. To claim a deduction for gifts of cash or property worth $250 or more, you must have a written statement from the qualified organization. The statement must show the amount of the cash or a description of any property given. It must also state whether the organization provided any goods or services in exchange for the gift.
  8. You may use the same document to meet the requirement for a written statement for cash gifts and the requirement for a written acknowledgement for contributions of $250 or more.
  9. If you donate one item or a group of similar items that are valued at more than $5,000, you must also complete Section B of Form 8283. This section generally requires an appraisal by a qualified appraiser.

If you have any questions you can call us at our office, 314-993-4285.

Tax Tips for the Self-Employed

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When you are self-employed, it typically means you work for yourself as an independent contractor, or you own your own business. Here are six key points the IRS would like you to know about self-employment and self-employment taxes:

  1. Self-employment income can include pay that you receive for part-time work you do out of your home. This could include income you earn in addition to your regular job.
  2. Self-employed individuals file a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business, with their Form 1040.
  3. If you are self-employed, you generally have to pay self-employment tax as well as income tax. Self-employment tax includes Social Security and Medicare taxes. You figure this tax using Schedule SE, Self-Employment Tax.
  4. If you are self-employed you may have to make estimated tax payments. People typically make estimated tax payments to pay taxes on income that is not subject to withholding. If you do not make estimated tax payments, you may have to pay a penalty when you file your income tax return. The underpayment of estimated tax penalty applies if you do not pay enough taxes during the year.
  5. When you file your tax return, you can deduct some business expenses for the costs you paid to run your trade or business. You can deduct most business expenses in full, but some costs must be ‘capitalized.’ This means you can deduct a portion of the expense each year over a period of years.
  6. You may deduct only the costs that are both ordinary and necessary. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and appropriate for your trade or business.

If you have any questions please call our office at 314-993-4285.

Foreign bank account filing responsibility is a real thing!

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September 11, 2001 changed everything.

The Patriot Act changed everything.

What changed?  Among other things, foreign bank account reporting and failure to file penalty.  If you are a U.S. citizen, it is incredibly important for you to contact us immediately if you have a foreign bank account, regardless of the size of the account, and you have not disclosed this to us previously.

After years of penalty abatement the IRS stance for forgiveness is that they will not charge you with the felony or throw you in jail, both of which are allowed under the law.  The penalty is $10,000 per occurrence.

It’s simple.  Call us if you have a foreign bank account. 314-993-4285.

Tax Practitioners Warned Against New E-mail Phishing Scam

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The IRS has alerted tax professionals in several states (California, Ohio, Oklahoma, Virginia) to a phishing scam, where scammers posing as tax software providers send e-mails asking recipients to click on an embedded link to download and install an “important software update.” The downloaded file’s naming convention uses the actual name of the tax professional’s software followed by an “.exe extension.” Upon completion, tax professionals mistakenly believe they have downloaded a software update when actually they have loaded a program designed to track their key strokes to steal login information, passwords and other sensitive data. (CCH State Tax Review, Vol 77, Issue 35)

A warning to all of our clients in all of our states, scammer technology, infrastructure, and intelligence is only constrained by our ability to heed the warnings of our advisors.  Life learned pearls of wisdom:

  • Never run with scissors;
  • Never talk with your mouth full;
  • Always look the other person in the eye;
  • Never respond to voicemail messages from anyone purporting to be with the IRS or state revenue agency;
  • Never respond (avoid opening if you can) to email from anyone purporting to be with the IRS or state revenue agency;
  • Never panic if the IRS or state revenue agency is threatening you.

In all above cases please call our office at 314-993-4285 and we are ready to help you out, (I’ll be sending you to my mom for the first three, she’s really good at those).

Resources on IRS.gov and Social Media Help Employers and Coverage Providers Understand ACA

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The Affordable Care Act (ACA) continues to befuddle industry.  The rules continue to evolve.  Use the Government website first in understanding the employer responsibilities.

Whether you are a business owner, tax manager, employee benefits manager or health coverage providers, the IRS knows that you want to understand how the health care law may affect your organization. When questions come up, IRS.gov/aca is a great place for you to begin finding the answers you need – when you need them.   At IRS.gov/aca, you’ll find frequently asked questions, legal guidance, and links to other useful sites. You can also access valuable information about specific topics, including rules and responsibilities for employers, as well as tax provisions for insurers, tax-exempt organizations and other businesses.

Resources for Employers and Coverage Providers

You can use social media tools to find information about the health care law.

  • IRS Videos Health Care playlist on YouTube
    • Are You an Applicable Large Employer?
    • Employer Shared Responsibility Payments
    • Highlights for Self-Insured Employers
    • Small Business Health Care Tax Credit
  • @IRSNews on Twitter

Health care tax tips come out weekly, and provide information about rules and requirements related to ACA. You can also browse the IRS health care tax tip archive to read all the tax tips published since 2013.

Pre-recorded webinars covering topics that include the corrections process for information returns, an overview of the employer shared responsibility provision, and information reporting. If you prefer to see the presentation slides, you can view them on the Affordable Care Act Information Returns (AIR) Program Overview page.

ACA Information Center for ALEs – one stop-shop web page with links to an array of resources.

The Taxpayer Advocate Service Estimator tools assist you in estimating credits and payments related to the Affordable Care Act.

Electronic publications covering topics to help your organization understand ACA:

  • Publication 5215: Understanding Reporting Responsibilities of the health care law
  • Publication 5208:  Are you an applicable large employer?
  • Publication 5200:  What employers need to know
  • Publication 5196:  Understanding employer reporting requirements of the health care law
  • Publication 5165: Guide for Electronically Filing Affordable Care Act Information Returns For Software Developers and Transmitters – Processing Year 2016

Questions and answers cover a wide range of topics related to the health care law:

  • Employer shared responsibility
  • Information reporting by employers on Form 1094-C and 1095-B
  • Information reporting by health coverage providers
  • Reporting of offers of health insurance coverage by employers

You can also access a web-based IRS flyer, Health Care Law Online Resources, for links to other federal agencies that also have a role in the health care law.

If you have any questions please do not hesitate to give us a call at our office, 314-993-4285.

This information was received from IRS Tax Tips Issue Number: HCTT-2016-64.

Understand Your Taxpayer Bill of Rights

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Every taxpayer has a set of fundamental rights. The “Taxpayer Bill of Rights” takes the many existing rights in the tax code and groups them into 10 categories. You should know these rights when you interact with the IRS. Publication 1, Your Rights as a Taxpayer, highlights a list of your rights and the agency’s obligations to protect them. Here is a summary of the Taxpayer Bill of Rights:

  1. The Right to Be Informed. You have the right to know what is required to comply with the tax laws. You are entitled to clear explanations of the laws and IRS procedures on all tax forms, instructions, publications, notices and correspondence. You have the right to know about IRS decisions affecting your accounts and clear explanations of the outcomes.
  2. The Right to Quality Service. You have the right to receive prompt, courteous and professional assistance in your dealings with the IRS and the freedom to speak to a supervisor about inadequate service. Communications from the IRS should be clear and easy to understand.
  3. The Right to Pay No More Than the Correct Amount of Tax. You have the right to pay only the amount of tax legally due, including interest and penalties. You should also expect the IRS to apply all tax payments properly.
  4. The Right to Challenge the IRS’s Position and Be Heard. You have the right to object to formal IRS actions or proposed actions and provide justification with additional documentation. You should expect that the IRS will consider your timely objections and documentation promptly and fairly. If the IRS does not agree with your position, you should expect a response.
  5. The Right to Appeal an IRS Decision in an Independent Forum.You are entitled to a fair and impartial administrative appeal of most IRS decisions, including certain penalties. You have the right to receive a written response regarding a decision from the Office of Appeals. You generally have the right to take your case to court.
  6. The Right to Finality. You have the right to know the maximum amount of time you have to challenge an IRS position and the maximum amount of time the IRS has to audit a particular tax year or collect a tax debt. You have the right to know when the IRS concludes an audit.
  7. The Right to Privacy. You have the right to expect that any IRS inquiry, examination or enforcement action will comply with the law and be no more intrusive than necessary. You should expect such proceedings to respect all due process rights, including search and seizure protections. The IRS will provide, where applicable, a collection due process hearing.
  8. The Right to Confidentiality. You have the right to expect that your tax information will remain confidential. The IRS will not disclose information unless authorized by you or by law. You should expect the IRS to take appropriate action against employees, return preparers and others who wrongfully use or disclose your return information.
  9. The Right to Retain Representation. You have the right to retain an authorized representative of your choice to represent you in your dealings with the IRS. You have the right to seek assistance from a Low Income Taxpayer Clinic if you cannot afford representation.
  10. The Right to a Fair and Just Tax System. You have the right to expect fairness from the tax system. This includes considering all facts and circumstances that might affect your underlying liabilities, ability to pay or ability to provide information timely. You have the right to receive assistance from the Taxpayer Advocate Service if you are experiencing financial difficulty or if the IRS has not resolved your tax issues properly and timely through its normal channels.

If you have any questions please do not hesitate to give us a call at our office, 314-993-4285.

This information was received from IRS Tax Tips Issue “IRS Summertime Tax Tip 2016-21”

Moving Expenses Can Be Deductible

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Did you move due to a change in your job or business location? If so, you may be able to deduct your moving expenses, except for meals. Here are the top tax tips for moving expenses.

In order to deduct moving expenses, your move must meet three requirements:

  1. The move must closely relate to the start of work.  Generally, you can consider moving expenses within one year of the date you start work at a new job location. Additional rules apply to this requirement.
  2. Your move must meet the distance test.  Your new main job location must be at least 50 miles farther from your old home than your previous job location. For example, if your old job was three miles from your old home, your new job must be at least 53 miles from your old home.
  3. You must meet the time test.  After the move, you must work full-time at your new job for at least 39 weeks in the first year. If you’re self-employed, you must meet this test and work full-time for a total of at least 78 weeks during the first two years at your new job site. If your income tax return is due before you’ve met this test, you can still deduct moving expenses if you expect to meet it.

See Publication 521, Moving Expenses, for more information about these rules. It’s available on IRS.gov/forms anytime.

If you can claim this deduction, here are a few more tips from the IRS:

  • Travel.  You can deduct transportation and lodging expenses for yourself and household members while moving from your old home to your new home. You cannot deduct your travel meal costs.
  • Household goods and utilities.  You can deduct the cost of packing, crating and shipping your things. You may be able to include the cost of storing and insuring these items while in transit. You can deduct the cost of connecting or disconnecting utilities.
  • Nondeductible expenses.  You cannot deduct as moving expenses any part of the purchase price of your new home, the cost of selling a home or the cost of entering into or breaking a lease. See Publication 521 for a complete list.
  • Reimbursed expenses.  If your employer later pays you for the cost of a move that you deducted on your tax return, you may need to include the payment as income. You report any taxable amount on your tax return in the year you get the payment.
  • Address Change.  When you move, be sure to update your address with the IRS and the U.S. Post Office. To notify the IRS file Form 8822, Change of Address.

Premium Tax Credit – Changes in Circumstances. 

If you or anyone in your family purchased health coverage through the Marketplace and had advance payments of the premium tax credit paid in advance to your insurance company to lower your monthly premiums, it is important to report life changes to the Marketplace when they happen. Moving to a new address is one change you should report. Other things to report include changes in your income, employment, family size, and gaining or losing eligibility for other coverage. Reporting life changes as they happen allows the Marketplace to adjust your advance credit payments. This will help you avoid a smaller refund or unexpectedly owing taxes when you file your tax return.

If you have any questions please do not hesitate to give us a call at our office, 314-993-4285.

This information was received from IRS Tax Tips Issue “IRS Summertime Tax Tip 2016-20”