Do You Have a Business That Pays Subcontractors? Form 1099-Misc is DUE SOON!
If you have a trade or business, the Internal Revenue Service (IRS) requires you to report certain payments you make as part of your business to both the payee and the IRS. There are new tax law changes regarding 1099-MISC forms that you need to know. Please take a few minutes to read the enclosed information so that you can prepare now for these changes and avoid costly fines regarding the filing of these forms.
If you paid anyone $600 or more during 2016, you and/or your business may need to issue Form 1099-MISC to the individuals or businesses that you paid. This memo will explain your requirements and penalties for not following the regulations. We will also explain the costs to engage AVL Tax Professionals to prepare these forms for you.
When is a 1099-MISC Required?
You are required to report on Form 1099-MISC when payments are made in the course of your trade or business. The business can be from general business, farming, rentals, or any trade or business which you own with an intent to operate for gain or profit.
You must file a Form 1099-MISC, Miscellaneous Income, for each person or entity to who you have paid during the year that is not a Corporation:
- At least $10 in Royalties
- At least $600 in
- Services (the dollar amount includes parts and materials)
- Prizes and Awards
- Other Income Payments
- Barter Income
- Medical and Health Care Payments
- Crop Insurance Payments
- Cash Payments for fish you purchase from anyone engaged in the trade or business of catching fish
- Any fishing boat proceeds
- Gross proceeds of $600 or more paid to an attorney (no exception for corporation)
Generally you do not have to issue a Form 1099-MISC for non-employee compensation paid to a corporation. Payments to corporations are reported only if they are for medical, veterinary, health care, legal or fishing activities.
What should be included on a Form 1099?
The following information is required by IRS for the processing of the 1099:
- The payee’s full name
- The payee’s Social Security Number or Employer Identification Number
- The payee’s legal mailing address
- The dollar amount, including labor and materials, paid to the payee
All of this information should be obtained from a completed form W-9. Our office recommends that you ALWAYS obtain a completed Form W-9 from any new contractor or business BEFORE you issue them a check or other payment.
Regulations and Penalties
With the passing of the PATH Act by Congress, there have been significant changes made to the issue of 1099’s. These are a few of those changes:
- All 1099’s must be completed and mailed to both the payee and the IRS no later than January 31st, 2017.
- The penalty for not filing a required 1099 is $100 per form.
- The penalty for Intentional Disregard is $250 per payee.
- Any expenses on your tax return that required a 1099 to be issued, such as rents and subcontractors, will be disallowed if you fail to file the proper 1099’s.
Can AVL Tax Professionals file my Form 1099’s?
We are able to prepare all Form 1099’s for you and this year we will be filing them electronically. There is an additional charge separate from your income tax preparation for this service.
In order to complete these forms:
- Please provide us with a complete list of anyone needing a Form 1099. The following information is required:
- Legal name and address of the Payee
- Social Security Number or Employer Identification Number for the payee
- Total amount of payments made to payee
- Type of payment, such as payment for services, rents, royalties, etc.
- We will complete 1099 projects in the order they are received in our office.
- If the package of data you send to us is not complete, we will have to reserve the right to not begin work until the full package is received.
For information received after January 20th, we cannot not guarantee that we will be able to meet the January 31st deadline.
Exciting News! IRS announced that e-filing will open on Tuesday Jan 19th, 2016!
Tax Time is Approaching!
Are you ready?
The IRS announced that e-filing will open on Tuesday Jan 19th. Give us a call at 828.277.4177 to set up your appoinment with one of our tax professionals.
Get ready for another great tax season with AVL Tax Professionals!
Don't Fall Prey To Tax-Time Scams - This is Good Info!
IRS Warns of Tax-time Scams
It’s true: tax scams proliferate during the income tax filing season. This year’s season opens on Jan. 31. The IRS provides the following scam warnings so you can protect yourself and avoid becoming a victim of these crimes:
- Be vigilant of any unexpected communication purportedly from the IRS at the start of tax season.
- Don’t fall for phone and phishing email scams that use the IRS as a lure. Thieves often pose as the IRS using a bogus refund scheme or warnings to pay past-due taxes.
- The IRS doesn’t initiate contact with taxpayers by email to request personal or financial information. This includes any type of e-communication, such as text messages and social media channels.
- The IRS doesn’t ask for PINs, passwords or similar confidential information for credit card, bank or other accounts.
Here are several steps you can take to help protect yourself against scams and identity theft:
- Don’t carry your Social Security card or any documents that include your Social Security number or Individual Taxpayer Identification Number.
- Don’t give a business your SSN or ITIN just because they ask. Give it only when required.
- Protect your financial information.
- Check your credit report every 12 months.
- Secure personal information in your home.
- Protect your personal computers by using firewalls and anti-spam/virus software, updating security patches and changing passwords for Internet accounts.
- Don’t give personal information over the phone, through the mail or on the Internet unless you have initiated the contact and are sure of the recipient.
- Be careful when you choose a tax preparer. Most preparers provide excellent service, but there are a few who are unscrupulous. Refer to Tips to Help you Choose a Tax Preparer for more details.
Premium Tax Credit Brings Changes to Your 2014 Income Tax Returns
When filing your 2014 federal income tax return, you will see some changes related to the Affordable Care Act. Millions of people who purchased their coverage through a health insurance Marketplaceare eligible for premium assistance through the new premium tax credit, which individuals chose to either have paid upfront to their insurers to lower their monthly premiums, or receive when they file their taxes.
When you bought your insurance, if you chose to have advance payments of the premium tax credit, the Marketplace estimated the amount based on information you provided about your expected household income and family size for the year. If you received the benefit of advance credit payments, you must file a federal tax return and reconcile the advance credit payments with the actual premium tax credit you are eligible to claim on your return. You will use IRS Form 8962, Premium Tax Credit (PTC) to make this comparison and to claim the credit. If your advance credit payments are in excess of the amount of the premium tax credit you are eligible for, based on your actual income, you must repay some or all of the excess when you file your return, subject to certain caps.
If you purchased your coverage through the Health Insurance Marketplace, you should receive Form 1095-A, Health Insurance Marketplace Statement from your Marketplace. You should receive this form by early February.
Form 1095-A will provide the information you need to file your taxes, including the name of your insurance company, dates of coverage, amount of monthly insurance premiums for the plan you and other members of your family enrolled in, amount of any advance payments of the premium tax credit for the year, and other information needed need to compute the premium tax credit.
Using a tax professional is the best way to file a complete and accurate tax return. We can guide you through the maze of forms and explain how the Premium Tax Credit could affect your 2014 tax return.
For more information about the Affordable Care Act and filing your 2014 income tax return, just give us a call 828.277.4177!