Chamber Post: Business Tax Information: Just wanted to remind you of your requirements to file 1099s for all 2014 payments to unincorporated individuals and businesses of $600 or more (rents, services, prizes, attorney fees, etc). The federal & state taxing authorities increasingly focus their attention in this area, imposing penalties which otherwise might be avoided. Consider the following: First, you need to determine if you have a trade or business. If you are operating to make a gain or profit, you have a trade or business. If you run a nonprofit organization, a government agency, or a trust of a qualified pension or profit-sharing employer plan, such are considered trades or businesses for 1099 purposes. The IRS made significant changes to the form 1099-MISC reporting requirements and expanded the types of payees and payments applicable. While the IRS might have previously abated the steep penalties, were advised such may not be the case in the future. Thoroughly review all disbursements made from January 1, 2014 through December 31, 2014, summarizing all payments to unincorporated individuals and businesses where accumulated total is $600 or more. You should make sure that you have the correct name, employer identification or social security number and address. If youre unable to confirm if a particular establishment is a corporation or not, issuing a 1099 might be a wise precaution. Beyond having to possibly subject yourself to the government auditor, if you fail to file a correct information return timely, you fail to include all information required to be on a return or you include incorrect information on a return, you can be subjected to an array of steep penalties if you cannot show reasonable cause. If the payee fails to furnish his or her taxpayer identification number (TIN), they are subject to backup withholding at a 28% rate. If you do not collect and pay backup withholding from affected payees as required, you may become liable for any uncollected amount. A good policy is to request every vendor to complete and provide a W-9 before you pay them. Firms maintaining trust or escrow accounts need to review these disbursements as well. Payments frequently overlooked, where 1099s should be issued, include payments out of these trust accounts as well as disbursements for interest, rentals, contracted services (other than for employees), part-timers where W-2s are not required or issued, commissions, individuals performing plant maintenance or cleaning services, etc. 1099s are required for individuals, partnerships, an LLC, etc. Do not think that just because a payment is made to a company, that it is a corporation. Payments to attorneys for legal fees that amount to $600 or more should be reported in box 7 of form 1099-misc. even if the attorney is incorporated. Report in box 14 of that form payments or gross proceeds paid to an attorney, such as in a settlement agreement, unless the attorneys fees are reportable by you in box 7. The exemption for payments to corporations does not apply to payments for legal services. Many clients have followed the suggestion having 1099s prepared by in-house staff or payroll service bureaus to keep professional fees at a minimum. Regardless, it is incumbent upon such firms to make sure that they still have someone review all 2014 expenditures since weve seen all too many types of payments go undetected. Meet the required January 31, 2015 filing date for distribution to the recipient and by February 28, 2015 to the IRS. If you need a payroll service, accountant or service recommendation, contact the Bernards Township Regional Chamber of Commerce at 908-766-6755. Your Bernards Township Regional Chamber of Commerce Works for You!
Posted on: Thu, 15 Jan 2015 11:20:00 +0000