Be On the Lookout for Your Form 1099s

Author: Keith Huggett

It's that time again! Time to send and receive your IRS Form 1099s. Every year the requirements are modified for Form 1099-MISC. When you are a recipient of a 1099-MISC form the IRS also gets a copy that is linked to your tax return.  Keeping aware of your incoming 1099s can save you a lot of time, money, and hassle.

Watch Your Mail.

With 1099s being sent out during the month of January, now is the time to keep a close eye on your mailbox. Because these forms are linked to your social security number failure to report your 1099s can end up causing an audit.

Relocated Lately?

If you have moved recently, be certain to file a change of address with the IRS using Form 8822.
Also, be certain that you have notified all of your contacts with your change of address. A simple forwarding order at your post office can help you keep track of your incoming Form 1099s.

Check for Errors.

Don't just assume your incoming 1099s are correct. The general deadline for issuing a Form 1099-MISC is January 31.  You then have 30 days to file the forms with the IRS.  If you send the forms and file simultaneously, you may not catch any errors.  Use the time between in order to send corrections if necessary.  Also be sure to open your 1099s as soon as you receive them.

If you need further information regarding Form 1099-MISC, the tax specialists at The Tax Office, Inc., are here to help.  A free download of Forms 1099: The Good, The Bad, & The Ugly is available on our website.  Please contact us for a free, no obligation evaluation of your tax situation.

New Forms May Holdup Your 2014 Tax Refund

Author: Keith Huggett

The IRS has added a new form to be completed for tax year 2014.  If you were successful in signing up for healthcare benefits required by the Affordable Care Act, you are now required to send in form 1095-A, which you can get from the Health Insurance Marketplace. Please be aware that this example is a draft, not the form to file.  Form 1095-A  will list all of the individuals in your household who receive the benefits and how much the government has spent subsidizing their premiums.

The Health and Human Services Department (HHSD) will be in charge of issuing the forms.  The lack of confidence in the HHSD primarily stems from the difficulties associated with the ACA website. Justifiably, tax professionals are concerned about their ability to have all the forms out and in the hands of the millions of Americans by the January 31st deadline.

1095-A provides information you need to complete Form 8962, Premium Tax Credit (PTC). You must complete form 8962 and attach it to your tax return if you wish to claim the Premium Tax Credit or if you received premium assistance through advance credit payments. If you or your family members enrolled in more than one qualified insurance plan then you will receive a Form 1095-A for each plan.

States who operate their own health insurance marketplaces are also required to issue their own forms to those receiving their benefits. Though the biggest responsibility falls on the shoulders of the HHSD to get the forms to the individuals residing in the 36 states that it serves.

Remember, this form only applies to those Americans who were able to sign up for health insurance through the healthcare exchange.  If you obtained your health insurance elsewhere, this does not apply to you.  If you have any questions regarding this form, or your tax return, please contact the qualified tax professionals at The Tax Office, Inc.

This Online Tax Tool May Save You Headaches Down the Line

Author: Keith Huggett

If you have paid an independent contractor more than $600 for services during 2013, you need to send out a 1099-MISC form by January 31, 2014.  That same 1099-MISC form will need to be filed with the IRS by February 28, 2014.  If you are filing electronically the date is extended until March 31, 2014.  In order to fill out this form, you need to have specific information about your independent contractor, such as the business name, tax id number, and business address.  This information is easily obtained by requesting that the contractor fill out a W-9 form for you. Now that you have this information you have the ability to check the information against what the IRS has by using their Taxpayer Idendtification Number Online Matching tool before sending out your 1099s.

In order to use this tool, you need to register to use the IRS e-services, select a username, password and PIN. Then you can register to use TIN Matching from the suite of e-service products available. The TIN matching services allow “authorized payers” the opportunity to match 1099 payee information against IRS records prior to filing information returns.

An authorized payer is one who has filed forms 1099-B, 1099-DIV, 1099-INT, 1099-MISC, 1099-OID or 1099-PATR with the IRS in at least one of the two past tax years.

Interactive TIN Matching will accept up to 25 payee TIN/Name combinations on-screen while Bulk TIN Matching will allow up to 100,000 payee TIN/Name combinations to be matched via a text file submission.  This service is free of charge at this time.  

When you submit your TIN/Name combinations you will get one of the following NUMERICAL results:

While this step is certainly not required, it may make things easier for you when it comes time to send out those 1099-MISC forms.  If you know ahead of time that the information you have is correct, there will be no worries come April 15th.  Should there be any erroneous information found, you now have time to obtain the correct information from your independent contractors so that no red flags are raised when your taxes are filed.

Should you have any questions regarding 1099s, your taxes, or filing requirements, the highly trained specialists at The Tax Office, Inc. are here to help you.  Contact us now.

 

 

Always Follow the Rules...

Author: Keith Huggett

In addition to keeping track of receiving and sending out payroll tax statements, 1099-MISCs and other tax season paperwork, there is another 1099 form that you will have to watch out for: the 1099-K. The 1099-K form is an informational return that your payment processor may send you to detail the payments that they process for you. This additional reporting document adds complexity to your tax preparation and may increase your risk of an IRS audit.

Here are three issues that deserve your attention:

1. Not every business will receive a 1099-K form: Merchant providers will send you one if you do at least $600 in transactions per year. Third-party settlement organizations, the most common of which is PayPal, will send you one if you do at least $20,000 of business over a series of at least 200 transactions.
2. 1099-K forms reflect gross payments: When your payment provider sends you a 1099-K, it will reflect the gross payment that they send you before subtracting fees. If you are only accounting for net payments after the settlement company's fees, your tax returns will not match the 1099 and you will be at risk of an audit. 
3. You might get fewer 1099-MISC forms: Clients who were reporting transactions to you on a 1099-MISC form may not send you one this year. If they are paying you through a third-party settlement organization, they should not send you a 1099-MISC. Their payments will be included in aggregate with other entity's payments on the 1099-K form that you get from your payment provider. This is an IRS regulation to prevent payments from being double reported.

With all of the 1099 forms that your business both receives and sends out, tax filing is getting even more complicated. The Tax Office, Inc. has a full staff of accountants and bookkeepers who can help you make sense of every tax form that you receive. Please contact us to get started.

It's Almost That Time of Year Again...

Author: Keith Huggett

If you've received money from just about any source other than work, you'll probably be receiving a 1099 form this year. These forms are informational returns that let you and the IRS know how much money you received, and since the IRS gets a copy, they are major audit fodder. 

Here are three major red flags for which you should pay close attention. 

1. Write-offs - If your 1099s come from self-employment income and you file a Schedule C, your return is more likely to be audited. The IRS audits small business people because they expect to find overstated expenses. As such, you should be very careful to ensure that you can document all of your write-offs.
2. Ensure that every 1099 is reflected on your return - A few years ago, the IRS invested in new computer technology that automatically matched returns to 1099s. This technology makes it very easy for them to spot discrepancies and flag your return for an immediate audit. Reporting more gross income than comes in on 1099s will usually not be a problem, since the IRS knows that you might receive income from payers that don't send a 1099.
3. PayPal fee deductions - Third-party payment services like PayPal are now required to file 1099s for income that they send you. Because of this, you may not be receiving a 1099 from vendors that pay through PayPal. Where the problem occurs is if you've been recording your income after PayPal takes its fee. PayPal will report the income that they paid you before their fee, and you will need to subtract those fees as expenses. If you don't, your return won't match your 1099.

Whether or not you pay close attention to these considerations, the IRS will. Given the large number of different 1099s and their complexity, keeping them straight can be hard. The Tax Office, Inc., knows how to handle them, report them and protect you from an unpleasant and expensive audit. If you expect to be receiving a 1099 form this year, it's a great time to contact us and get started on your taxes. If you would be interested in learning more about 1099s in general there is an informational white paper available, entitled Form 1099-Misc, The Good, The Bad, & The Ugly.

Using the Incorrect Tax Form Can Cost You

Author: Keith Huggett 

What qualifies as a "simple" tax return? Are you certain that you know? Are you using the correct form? Do you need to use the 1040EZ, the 1040A, or the 1040? There are special qualifications for the use of each form, and if you use the incorrect one when filing your taxes it can cost you.

The simplest form is the 1040EZ. To qualify to use the 1040EZ:

• Your filing status is either single or married filing jointly.
• You and your spouse (if married) are both under age 65.
• Neither you nor your spouse are legally blind.
• You have no dependents.
• Your interest income is less than $1,500.
• Your income, singly or combined, is under $100,000.
• You cannot have income and expenses from self employment nor can you received 1099-Misc forms.
• The only credit you can claim is the Earned Income Credit and Federal Income Tax Withholding.

The 1040A is a little bit less strict. You can file the 1040A using any of the 5 filing status options: single, married filing jointly or separately, qualifying widow(er), or head of household. The following qualifications apply to the 1040A:

• Your taxable income, or combined incomes is below $100,000.
• You have capital gain distributions, but no other capital gains or losses.
• You do not itemize deductions.
• You may make adjustments to income for educator expenses, IRA deductions, student loan deductions and tuition and fees.
• You may claim the following credits:

1. The Child and Dependent Care Credit
2. The Credit for the Elderly or Disabled
3. Education Credits
4. Retirement Savings Contribution Credit
5. Child Care Tax Credit
6. The Earned Income Tax Credit
7. Additional Child Tax Credit

• You did not have an AMT tax adjustment on stock you acquired from the exercise of an incentive stock option.

If you cannot use form 1040EZ or form 1040A you must use form 1040. You can use form 1040 to report all types of income, deductions and credits. By this time, we are no longer talking about a "simple" tax return.

The tax specialists at The Tax Office, Inc. take the extra time to discuss with your business and personal plans for the future. We talk about what your financial outlook happens to be in order to be certain that every deduction and credit is applied to your return. With proper tax planning in place, we can assist you with attaining your goals.

Form 1099 Due Date Coming Soon!

AUthor: Keith Huggett

It's the new year, and 1099s are due once again. What is a 1099? Do you need to file them? Well, let's start with the initial question. What is a Form 1099? A Form-1099 is an informational return. It provides specific information to the Internal Revenue Service. There are, in fact, 17 different types of 1099 forms:

• 1099-A - Acquisition or Abandonment of Secured Property
• 1099-B - Proceeds from Broker and Barter Exchange Transactions
• 1099-C - Cancellation of Debt
• 1099-CAP - Changes in Corporate Control & Capital Structure 
• 1099-DIV - Dividends & Distrubutions
• 1099-G - Certain Government Payments
• 1099-H - Health Coverage Tax Credit Advance Payments
• 1099-INT - Interest Payments
• 1099-K - Merchant Card & Third-Party Network Payments
• 1099-LTC - Long-Term Care & Accelerate Death Payments
• 1099-MISC - Miscellaneous Income *
• 1099-OID - Original Issue Discount
• 1099-PATR - Taxible Distributions Received from Cooperatives
• 1099-Q - Payments Received from Qualified Education Programs
• 1099-R - Distributions from Pensions, Annuities, Reitrement or Profit Sharing Plans, IRAs, Insurance, etc.
• 1099-S - Proceeds from Real Estate Transactions
• 1099-SA - Distributions from an HSA, Archer MSA, or Medicare Advantage MSA

Do you need to file a form 1099? Of the 17 1099 forms, there are 3 forms that are most commonly used. They are the Form 1099-DIV, the Form 1099-INT, and the Form 1099-MISC. In regards to a 1099-DIV, it is required to file a form 1099-DIV for each person to whom you have paid $10 in dividends, including capital gains dividends and exempt-interest dividends and other distributions on stock or $600 or more in liquidations.

A 1099-INT form is required for each person to whom you have paid more than $10 in interest, interest on savings bonds & treasury obligations, and/or tax-exempt interest.

Form 1099-MISC has a few more requirements. If you have paid out any of the following you are required to file a 1099-Misc for each person/business:

• $10 in royalties or broker payments
• $600 in the following:
• rents and services; prizes and awards; other income payments
• medical and healthcare payments;crop insurance proceeds
• cash payments for fish you purchase from anyone engaged in the trade or business of catching fish; any fishing boat proceeds
• the cash paid to a notional principal contract to an individual, partnership, or estate
• gross proceeds of $600 or more paid to an attorney

The 1099-MISC sounds very complicated. For more detailed information on this form, you can download an informational whitepaper, Form 1099-Misc, The Good, The Bad, and The Ugly! 

Each of the Form-1099s are required to be sent out to the people with whom you have done business. Each form has multiple copies. This is provided so that you can send one copy to the person in question; keep a copy for your records; and file a copy with the IRS. The initial copy needs to be sent out to your independent contractor - the person you do business with- by January 31, 2013. This is true, no matter which 1099 form you need to issue. You have until February 28th, 2013 to file the forms with the IRS, if you are sending in the paper forms by mail. If you are electronically filing the forms, you have until March 31, 2013.

If this seems a bit overwhelming, contact the tax specialists at The Tax Office, Inc. We are always ready to lend a helping hand, with answers to your tax questions.