Employers have a myriad of responsibilities with regard to compliance. An example of one such burden is filing information returns. Forms 1099 & W-2 are a few examples of information returns. Any business who makes reportable transactions during the calendar year must file information returns.
In order to determine the existence of a filing requirement for Form 1099, it is necessary to obtain Form W-9 from vendors prior to the issuance of payment. While the ins and outs of Forms 1099 and W-9 can be complicated, they can be roughly understood as the forms required by the IRS to properly file business payments, which are payments (single or cumulative) made by a trade or business for rents or services of $600 or more, with few exceptions. A 1099 is the form filed by the payer, and a W-9 is an informational form filled out by the payee.
CHANGES TO INFORMATION RETURNS
Starting with the 2016 tax year, new due dates were put in place to increase the accuracy of taxpayer income tax returns. These changes will require a greater need for employers to provide timely and accurate information. One of the most notable changes to tax legislation has been the requirement to furnish completed Forms 1099 and W-2 by January 31. This means that for the 2016 tax season, completed forms must be issued to the taxpayer, and to the IRS and/or the Social Security Administration on or before January 31, 2017. Additionally, there are no longer automatic extensions for W-2 Forms. While the deadline for certain information returns to the recipient has not changed, the deadline for these returns to be filed with the IRS and Social Security Administration has changed, previously the due date was February 28 or March 31, and now it will be January 31.
In line with these changes, the IRS has increased maximum penalties for incorrect, late, or disregarded filing. The IRS policy changes have made clear the intention to both apply and increase these penalties. The IRS Budget further illustrates this with an increased emphasis on investigation and enforcement.
COMBAT FUTURE STRESS
A few simple steps can help us to assist you in conforming to the new IRS regulations in order to minimize penalties and audits.
We need your help in taking these steps and gather the data required to submit the information returns. With your cooperation, we can assist you in conforming to the new regulations, thus avoiding or minimizing penalties and audits.
Keep these things in mind:
1. Forms 1099 & W-2 are due on or before January 31.
2. Ensure W-9s are on file for all vendors
3. Increased penalties and enforcement are in effect.