Penalties for Not Filing a 1099-Misc

If you receive income from a source other than earned wages or salaries, you may receive a Form 1099-MISC, Miscellaneous Income.Generally, the income on this form is subject to federal income tax and state income tax. The IRS requires those that pay miscellaneous income in the course of their trade or business to issue Form 1099-MISC to their payees and requires the payees to include these payments on their tax returns.

Form 1099-MISC

Several types of income can be reported on Form 1099-MISC, including non-employee compensation, rent, royalties and fishing boat proceeds. One of the most common reasons for receiving a 1099-MISC is performing work as an independent contractor. If you have the payer withhold federal income tax from your  payments, the payer will report the withholding in Box 4. State income tax withholding is reported in Box 16.

Penalties for not issuing Form 1099-MISC

People and companies that make payments of miscellaneous income to individuals must give the payee Form 1099-MISC by the end (in most cases) of February of the year following the tax year in which the income was paid. For example, if you received miscellaneous income in 2012, the paying institution or individual must issue Form 1099-MISC by February 28, 2013. If the institution fails to do so, the penalty against the company varies from $30 to $100 per form ($500,000 maximum per year), depending on how long past the deadline the company issues the form. If a company intentionally disregards the requirement to provide a correct payee statement, it is subject to a minimum penalty of $250 per statement, with no maximum.

Penalties for not reporting Form 1099-MISC

The amount of the penalty is based on when the correct 1099 is filed:

• $30 per information return if you correctly file within 30 days of the due date (by March 30 if the due date is February 28). The maximum penalty is $250,000 per year ($75,000 for small businesses).
• $60 per information return if you correctly file more than 30 days after the due date but by August 1; maximum penalty $500,000 per year ($200,000 for small businesses).
• $100 per information return if you file after August 1 or you do not file required information returns. In this case the maximum penalty is $1,500,000 per year ($500,000 for small businesses)

If you do not file corrections and you do not meet any of the exceptions to the penalty described above, the penalty is $100 per information return.  

Exceptions to the penalty

The following are exceptions to the failure to file penalty.

• The penalty will not apply to any failure where you can furnish a reasonable cause to prove that it was not a willful neglect. In other words, you must be able to show that your failure was due to an event beyond your control or due to significant mitigating factors. You must also be able to show that you acted in a responsible manner
  and took steps to avoid the failure.


• An insignificant error or omission is not considered a failure to include correct information. An insignificant error or omission does not stop the IRS from processing the return, from correlating the information required to be shown on the return with the information shown on the payee's tax return, or from putting the return to its actual use. Errors and omissions that are not considered as in significant are those that are related to
  (a) a TIN, (b) a payee's surname, and (c) any money amount.


• Deminimis rule for corrections. Even though you cannot show reasonable cause, the penalty for failure to file correct information returns will not apply to a certain number of returns if you:
  • a. Filed those information returns,
  
  
  • b. Either failed to include all the information required on a return or included incorrect information, and
  
  
  • c. Filed corrections by August 1.

If you meet all the conditions in a, b, and c above, the penalty for filing incorrect returns (but not for filing late) will not apply to more than 10 information returns or ½ of 1% of the total number of information returns you are required to file for the calendar year.
Intentional disregard of filing requirements. If any failure to file a correct information return is due to intentional disregard of the filing or correct information requirements, the penalty is at least $250 per information return with no maximum penalty
                 

How to report Form 1099-MISC on your return

To avoid an underpayment penalty, be sure to include your miscellaneous income on your Form 1040. If your income is non-employee compensation, you’ll need to complete, in most cases, Schedule C, Profit or Loss From Business, and then transfer the net earnings to Line 12. For rents or royalties, complete Schedule E, Supplemental Income or Loss, and then enter the net income on Line 17 of Form 1040.

1099 forms

Receiving 1099 form and reporting it to IRS is not an uncommon thing. 1099 form is used to report various incomes other than wages, salaries and tips for which form W2 is used.  1099 forms are given to individual contractors for services rendered by them to small businesses. Businesses provide a 1099 form only if the individual contractor has earned an income of $600 and above. If not, then no 1099 form is required. However there are various 1099 forms for different purposes. Below is the description provided for  all types of 1099 forms:

FORM 1099-A

 What is form 1099-A?
If you borrow money from a commercial lender and the lender later cancels or forgives the debt, you may have to include the canceled amount in income for tax purposes, depending on the circumstances. When you borrowed the money you were not required to include the loan proceeds in income because you had an obligation to repay the lender. When that obligation is subsequently forgiven or the property is abandoned or foreclosed, the amount you received as loan proceeds is reportable as income. The lender is usually required to report the amount of the canceled debt to you and the IRS on a Form 1099-A, Acquisition or Abandonment of Secured Property, or Form 1099-C, Cancellation of Debt.

 

When to file form 1099-A? File Form 1099-A, Acquisition or Abandonment of Secured Property, for each borrower if you lend money in connection with your trade or business and, in full or partial satisfaction of the debt, you acquire an interest in property that is security for the debt, or you have reason to know that the property has been abandoned. You need not be in the business of lending money to be subject to this reporting requirement.

FORM 1099-B

 What is form 1099-B?
A form issued by a broker or barter exchange that summarizes the proceeds of all stock transactions. The sale of a stock will be accompanied by a gain or loss, which must be reported to the IRS when you file your taxes. Specifically, figures from form 1099-B are used on IRS Form 1040, Schedule D. For example, let's assume you sold several stocks within the last year and the proceeds of the transactions equal a capital gain of $20,000. The amount gained from the sale of the stocks will be issued in form 1099-B by your broker and this amount must be included when you file your income taxes.

 

Who is supposed to file form 1099-B? A broker or barter exchange must file Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, for each person:

• For whom the broker has sold (including short sales) stocks, bonds, commodities, regulated futures contracts, foreign currency contracts (pursuant to a forward contract or regulated futures contract), forward contracts, debt instruments, etc., for cash,
• Who received cash, stock, or other property from a corporation that the broker knows or has reason to know has had its stock acquired in an acquisition of control or had a substantial change in capital structure reportable on Form 8806, or
• Who exchanged property or services through a barter exchange

FORM 1099-C

 When to file form 1099-C
Do not file Form 1099-C when fraudulent debt is canceled due to identity theft. Form 1099-C is to be used only for cancellations of debts for which the debtor actually incurred the underlying debt. File Form 1099-C, Cancellation of Debt, for each debtor for whom you canceled a debt owed to you of $600 or more if:

• You are an entity described under Who Must File
• An identifiable event has occurred. It does not matter whether the actual cancellation is on or before the date of the identifiable event.
• Form 1099-C must be filed regardless of whether the debtor is required to report the debt as income.
• The debtor may be an individual, corporation, partnership, trust, estate, association, or company.
• Do not combine multiple cancellations of a debt to determine whether you meet the $600 reporting requirement unless the separate cancellations are under a plan to evade the Form 1099-C requirements.

FORM 1099-S

 What is form 1099-S?
Form 1099-S Proceeds from Real Estate Transactions, is the official form used to report the sale or exchange of real estate. Generally, you are required to file form 1099-S to report a transaction that consists in whole or in part of the sale or exchange for money, indebtedness, property, or services of any present or future ownership interest in any of the following:

• Improved or unimproved land, including air space;
• Inherently permanent structures, including any residential, commercial, or industrial building;
• A condominium unit and its appurtenant fixtures and common elements, including land;
• Stock in a cooperative housing corporation (as defined in section 216); and
• Any non-contingent interest in standing timber.

FORM 1099- PATR

 What is form 1099-PATR and who is supposed to file it?
File Form 1099-PATR, Taxable Distributions Received from Cooperatives, for each person to whom the cooperative has paid at least $10 in patronage dividends and other distributions described in section 6044(b) or from whom you withheld any federal income tax under the backup withholding rules regardless of the amount of the payment. A cooperative determined to be primarily engaged in the retail sale of goods or services that are generally for personal, living, or family use of the members may ask for and receive exemption from filing Form 1099-PATR. Report on Form 1099-PATR only items of income, expenses, and credits that you properly pass through to patrons for reporting on the patron's tax return.

 

Exceptions to file form 1099-PATRGenerally, you are not required to file Form 1099-PATR for payments made to a corporation, a tax-exempt organization including tax-exempt trusts (HSAs, Archer MSAs, and Coverdell ESAs), the United States, a state, a possession, or the District of Columbia. 

FORM 1099-MISC

 What is 1099 misc form?
1099 misc form is used to report certain types of payments made in the course of a trade or business. If you're a small business owner who has hired the services of an independent contractor or freelancer, you may need to file and submit the 1099 misc form to both the Internal Revenue Service and the person or business that you paid. Normally, a 1099 misc form has to be reported if at least $600 has been paid to the recipient.

FORM 1099-K

 What is tax form 1099-K?
Payments made with a credit card or payment card and certain other types of payment, including third party network transactions, must be reported on Form 1099-K by the payment settlement entity (PSE) under section 6050W and are not to be reported on 1099 Misc form. In simple words, a 1099-K form is used to report income that you received from credit cards, debit cards, or other electronic payments, such as eBay and Pay Pal. Businesses that will see their income reported on form 1099-K are those with more than 200 credit card transactions and more than $20,000 gross income from credit card sales

FORM 1099-INT

 What is form 1099-INT?
1099 INT is the official form issued by all payers of  interest  income to investors at year's end. Form 1099-INT break down all types of interest income and related expenses.  Payers must issue Form 1099-INTs for any party to whom they paid at least $10 of interest during the year. In simple words, IRS Form 1099-INT is sent to those taxpayers who received interest income during the current tax year, such as that from a savings account.

FORM 1099-DIV

 What is form 1099-DIV?
A form sent to investors by investment fund companies. The form is a record of all taxable capital gains and dividends paid to an investor, including those that have been re-invested in a given taxation year. The amounts stated on the form represent the amounts that fund companies are attributing to each investor's investment return for the year and reporting to the IRS. Investors use Form 1099-DIV to help report income received from investments on their tax return each year. In other words, Form 1099-DIV reports the ordinary dividends, total capital gains, qualified dividends, non-taxable distributions, federal income tax withheld, foreign tax paid and foreign source income from each investment account held by a fund company. Forms are not sent to investors who received or re-invested a total of less than $10 per fund. 

 The filing season for 1099forms starts January 1^st 2013. Businesses have to ensure that they provide the correct and required 1099 forms to the contractors/payee by January 31^st 2013. Businesses also have to efile 1099 forms with the IRS compulsorily. The filing deadline for paper filers is Feb 28^th 2013 and for electronic filers is April 1st 2013.

WHO SHOULD FILE 1099 FORMS

A 1099 tax form is an informational reporting form which is required to be filed with the IRS if any payment of $600 and above has been made by businesses or individuals to independent contractors in year 2012. The type of payments that are legible to be filed on form1099 are: Rent, health care payments, services offered by freelancers, attorneys, royalties, Payments to crew members by owners or operators of fishing boats and etc.

In the case of agricultural sector, a farmer would have to file tax form 1099 for year 2012 if they want to write off the cost of the custom hay baling they had done this year. Services that require a farmer to file a 1099 form include: painting the barn, hoof trimmers or certified crop consultants.

Services that exempt you from filing 1099 forms include hauling freight which means livestock hauling or grain hauling is not required to be reported on 1099 form. Moreover, 1099 filing is not required to be reported for the purchase of equipment parts, seeds or fertilizers. Also a farmer is not supposed to file a 1099 form is he spends less than $600.

It is very necessary that farmers maintain their books on the payments they have made for year 2012-2013 because if they fail to file 1099 forms with the correct information then it can cost them huge Penalties and losses.

Failure to file a 1099 form, could cost a farmer fine of $100 per form. If the internal revenue finds out that it was a willful neglect on the part of the farmer to file the 1099 form, then it can result in greater costs for the farmer in the form of $250 per filing. Sadly, small farmers who are unaware of such information fail to file the 1099 forms and thus have to face great adversities.

If business is not incorporated, then a 1099 form is required for all service providers. If the farmers are not incorporated, then they need to ask the business doing the service for their social security number (SSN)

Moreover, if a farm owner acquired above $600 as rent, then it is mandatory to file 1099 form. Farmers have to talk to their landlords in order to get their 1099 forms.

1099 forms were started by the IRS as a step to fill the tax gap. Most of the income earned by non-employees/freelancers was being unreported and hence resulting in huge tax gap for the government. In order to narrow the gap, Congress came up with the 1099 forms.

For year 2012-2013, a 1099 form has to be sent to the recipient no later than January 31st 2013.

 There are 3 copies of the 1099 form.

·        One is kept by the payer,

·        One is sent to the recipient and

·        The other copy is filed with internal revenue service. 

Businesses are supposed to file the 1099 form with the IRS no later than February 28th 2013. However if you efile 1099 form which obviously is a better choice, then the due date would be April 1st 2013

Electronically filing a 1099 form is a very easy and effortless method as compared to the paper filing method. Nowadays IRS has made it compulsory for businesses who have to file 250 1099 forms to electronically file them. If you fail to do so, then penalties are imposed on you. Also if you are filing less than 250 1099 forms, still you are encouraged to e-file as it is cost effective, quick, and secure and provide IRS confirmation in less time than anticipated.  You can either e-file through the IRS website or make use of an IRS approved e-file provider such as 1099online.com to e-file your 2012 form 1099 efficiently

IRS FORM 1099 REPORTING REQUIREMENTS

The Internal Revenue Service (IRS) requires businesses (including not-for-profit organizations) to issue a Form 1099 to any individual or unincorporated business paid in excess of $600 per calendar year for services rendered. This is required whether these payments are spread out over the course of the year or are paid in one lump sum payment. This form is generally not required to be issued to incorporated businesses. The only exception is when payments are made to incorporated law firms. A 1099 must be issued. whenever payments in excess of $600 per calendar year are made to law firms.

The penalty for failure to file Form 1099 can be as much as 50% of the amount paid for services. The responsibility for filing the Form 1099 is on the organization paying for the services (each state component). It is the responsibility of the individual/business receiving the Form 1099 to handle it properly on their tax return.

  Every year businesses have to prepare a vast number of 1099 forms and provide a copy of each 1099 form to their payees/recipients, so that they can use it for their income tax purposes. Moreover, besides providing a copy to payees, businesses also have to file one copy with the internal revenue services for their record. Considering that businesses have to prepare a huge number of 1099 forms every year, thus IRS has made it compulsory that businesses who have to file 250 and above 1099 forms will have to mandatorily use electronic filing system to file 1099 misc forms. Efiling 1099 forms is actually a quick, easy and secure method to file tax form 1099 misc. Filing deadline for 1099 electronic filing payers is April 1st 2013. Although you can efile 1099 forms on your own, but it would require you to download the software and then efile. However, one such company that has come up with advanced efiling software for 1099 filing is 1099online.com. You can learn more about their efiling offerings and services at 1099online.com.

How to get your 2012 form 1099 misc electronically filed in minutes

Every year businesses have to file 1099 misc forms with the IRS to report Incomes they have paid to independent contractors/individuals for services rendered by them. 1099 Misc forms are basically filed for those individuals who are not part of the company, yet have provided their services and thus have received $600 and above from the company in form of compensation.

Traditionally, form 1099 misc was filed by businesses using the paper filing method where you would have to manually enter all the data and submit it to the IRS along with form 1096. Paper filing method can turn out to be quite cumbersome and painful if there are hundreds of 1099 misc forms to be filed. Moreover, paper filing method can also turn out to be very costly as you would have to spend on postal stamps and mailing services. Not only that, but have you ever realized how much paper is wasted to file 1099 forms on paper. Millions of paper is wasted each year to file 1099 forms be it a new form or corrected form. Do you know what it means to waste so much paper? Wasting paper means we are wasting our environment. Thousands and thousands of trees are sacrificed just to produce few tons of paper. We eliminate trees, we eliminate our environment.

Hence in order to eradicate the complexities arising out of paper filing method for 1099 forms, IRS came up with the best solution ever; EFILE method of paper filing. Electronic method of paper filing is by far the most suitable solution to file 1099 forms. Efile method has not only helped to solve the problem of filing 1099 forms quickly but it’s one of the safest and easiest solutions for 1099 filing. On top of that, no paper usage means nil environmental damage. Moreover, if you efile 1099 misc form, it takes minutes to fill your form and submit it to the IRS. IRS receives your submission within the same day and sends you IRS acceptance confirmation within 24 hours.

Now, there are 2 methods to efile 1099 misc forms.  First method would be to efile 1099 misc form directly with the IRS FIRE system and the second step would be to efile 1099 misc form through an IRS authorized efile service provider.

STEPS TO EFILE 1099 MISC WITH THE FIRE SYSTEM:

1. Purchase and install a software program that will create and transmit 1099 forms in the proper electronic format.
2. Request a transmitter control code (TCC) by filling out IRS Form 4419, "Application for Filing Information Returns Electronically." You will need to provide basic information such as your business name and address. You also must include your Employer Identification Number (EIN). If you do not have an EIN, you must obtain one before submitting Form 4419.
3. Mail or fax the form to the IRS at least 30 days before the deadline for filing 1099s. The IRS will send your 5-character transmitter control code by mail once the application is approved.
4. Create an account on the FIRE system. You will enter your company name, company address, company phone number, contact name and email address. You can create the account before you get your transmitter control code.

5. Prepare your 1099 information for transmittal using the features of your software program.

6. Transmit your 1099 forms to the FIRE system once you have received your transmitter control code and entered it into your software program.

STEPS TO EFILE 1099 MISC WITH AN EFILE SERVICE PROVIDER 

1.     Select your preferred IRS approved efile provider for 1099 misc form filing
2.     Register with the service provider
3.     Select the 1099 misc form from the list of 1099 forms service offered by the service provider
4.     Fill in your 1099 misc information.
5.     Click on the Submit to IRS button and your returns are transmitted to the IRS. A confirmation email will be sent to you about the status of your submission

And that’s it…… 
Now, which one do you think is the easiest step of all? Second one, isn’t it? You don’t have to purchase any software; you don’t have to fill any 4419 form; you don’t have to go through any cumbersome steps. Using an efile service provider is so simple because you just have to fill out your information and they do the rest. They transmit your information to the IRS through the FIRE system and send you IRS acceptance e-mail. There are some providers such as 1099online.com who even print and mail 1099 misc forms to the recipients. However, before selecting on a service provider make sure they are IRS approved and have an IRS authorized logo on their website.

 

 

Last date to send 1099 form to recipient is tomorrow

It is time for businesses who hired services of contractors and freelancers to send 1099 forms to them. 31st January 2012 is the last date for businesses to send 1099 forms to the recipients. Last date to file 1099 form with IRS for paper filers is Feb 28th 2012 and for electronic filers is April 2nd 2012.

If you still have not send form 1099 to your contractor then make sure you do it as soon as possible to avoid possible penalties.

Form 1099 tax deduction list for 2011-2012

Internal revenue service department says that Income tax filing season is underway and the last date to file your returns is April 17th 2012. Although the filing deadline is 3 months away, still taxpayers should gear themselves up for an early start to make the tax filing season easier for them.

"The first thing you'll want to do is to gather your records and round up any documents you'll need when filing your taxes," said Clay Sanford, an IRS spokesman in Dallas. "Get into the habit of keeping good records every year — saving receipts, canceled checks and other documents that support income or deductions you're claiming on your return."

He said Form W-2s and/or Form 1099s will be needed to file a tax return. He said those who do not receive their Form W-2 or 1099 by Jan. 31, or whose information is incorrect, should contact their employer or payer.

1099 misc forms are filed by businesses or individuals who hired the services of independent contractors for year 2011-2012. In other words, 1099 misc forms are used to report the income ($600 and above) earned by freelancers, independent contractors and any self employed person hired on contract basis. Last date to send 1099 misc forms to recipients is January 30th 2012.

1099 Misc form is necessary for independent contractors as the form is required for the income tax filing purpose. Independent contractors will have to report to IRS any income they earn as freelancers through 1099 misc form. There is no way you can try to escape from reporting the income because your payer will also provide a copy of your 1099 misc form to the IRS. However, independent contractors can get certain tax relief from 1099 tax deductions:

Here is a list of 1099 tax deductions for independent contractors:

• Inventory
• eBay fees
• PayPal fees or shopping cart fees
• Shipping fees and supplies
• Postage
• Office supplies
• Advertising
• Mileage - use your car for business purposes
• Phone - cell phone or second line
• Bank charges - business checking account
• Accounting and legal fees
• Computer and software
• Internet, website and faxing services
• Contract labor - VA, coaches, web designer
• Furniture and office equipment
• Membership fees and dues
• Continuing education
• Home office expenses

Few names have been provided above. To find out the complete list or 1099 tax deductions which you are eligible for; kindly contact your tax professional or IRS.

Moreover, if you hired the services of a contractor and paid him income via PayPal, cash card or any third party payment network, then you do not need to issue him/her a 1099 misc form. The third party payment network will issue him/her form 1099-K (form for credit card and third party payment processors)

All about form 1099-K

From tax year 2011 onwards, credit card merchants and third party payment networks such as e-bay, PayPal, Amazon and etc will have to start sending 1099 K forms to sellers who meet their criteria. If you earn money online by selling products, freelance writers and etc then be ready to receive 1099-K for year 2011-2012.

Although the form has been in the making since a long time, however it will be implemented from tax year 2011 -2012 onwards. The original bill proposed that credit card processors be required to file 1099s for each seller that had at least $10,000 in gross sales and 200 transactions. However, the original proposal has been a little modified where you must have at least $20,000 gross sales and 200 transactions before you are required to receive 1099-K form from third party network companies. Hence, less people are now affected by the 1099-K form filing.

How to file 1099 forms?

There are 2 methods to file 1099 forms. One is paper filing method and other is efile method. Electronic filing method is the most preferred method among tax filers because of its easy and efficiency. You can either file 1099 forms through IRS website or avail expertise support of an IRS authorized efile service provider. Although there are many service providers who claim to be leaders and provide the best services, however one such service provider who has never let down its clients is 1099online.com. You can efile 1099 forms on their website easily, swiftly and efficiently for as low as $0.55 per filing. They offer the lowest pricing in industry with top class and secure services.

Due date to issue a 2011 form 1099 misc to independent contractor is fast approaching.

It’s been 2 weeks since the start of year 2012. Since the beginning of New Year, we have been advising businesses and individuals to start preparing documents for reporting their informational returns. You have 2 more weeks left to issue a 1099 misc form to your contract workers.

1099 misc form generally titled as ‘miscellaneous Income’ is the official form which businesses have to issue to their contract workers (non employees of the firm) for services provided by them and in return the contract workers were paid $600 and more.

1099 misc forms are issued to contract workers or non employees of the firm, because they would need the 1099 misc during their income tax filing. The information provided on Form 1099-MISC includes non-employee compensation, federal and state income taxes withheld, and medical and health care payments.

January 31^st 2012 is the last date to issue a 1099 misc form to your contractor. You must also file a 1099 misc form with the IRS. If you are paper filing a 1099 form, then the due date is Feb 28^th 2012 and if you are efiling 1099 misc form, then the due date is April 2^nd 2012.

E filing is the most appropriate option when you are filing for 1099 forms. This is because of many reasons:

• Efiling is quick and easy process
• Efiling is safe and secure
• Efiling saves paper
• Efiling provides IRS confirmation much earlier than paper filing
• Efiling is cost effective.

There are many service providers offering efiling service for 1099 forms, but personally, I prefer 1099online.com. Their services are wonderful and offer an easy navigation for 1099 misc efile. If you want to get your 1099 forms filed in a quick and easy manner along with protecting your wallet, then definitely opt for 1099online.com

Tax form 1099 reporting requirements for year 2011-2012 have been repealed.

Earlier it was said that from 2011 onwards there would be huge changes in the reporting requirements for form 1099. However, fortunately two of those 1099 filing rules which would have created disturbance and chaos among business owners, brokers, agents and other intermediaries have been revoked by the congress.

On a brief background check, a 1099 form is an informational reporting form required to be filed with the IRS by business owners or any individual who hires the services of an independent contractor/freelancer and pays him at least $600 in remuneration for his services. The reason why Congress started informational return reporting was to reduce the tax gap that had risen out of no reporting of income earned by freelancers.

When the new legislation was passes for the new 1099 reporting requirement for year 2012, it was a great deal of concern for the business owners as the new 1099 requirements would have resulted in huge filing and administrative costs. The new 1099 filing regulation would have surely lead to thousands of additional and unnecessary 1099 form filing.

The new 1099 filing rule required that 1099 forms should be issued to all business owners both under service and property for $600 and above. Moreover, even corporations were no longer exempt from filing form 1099. Hence, business had to issue large number of 1099s and they had to obtain a TIN from the vendor in order to avoid the required backup withholding of federal income tax.

Another rule under the new legislation was to include rental property owners, which means that if you are a house owner and you rented your house and paid an individual around $1000 to paint your house, you would then have to issue form 1099. Property owners would have been required to file 1099s as early as 2011 and would have been required to comply with the all the other troublesome 2012 form 1099 changes

However, businesses need not worry about the new 1099 reporting regulations and the new rules have been repealed by the government. 1099 reporting remains the same as it was earlier. Businesses can continue filing 1099 forms without any hindrance and troubles.

Pointers on current 1099 rules

• Businesses should issue a Form 1099-MISC to appropriate vendors (non-corporate) to whom they paid more than $600 for services during a calendar year. The Form should be provided to the vendor by January 31st and should be mailed to the IRS (along with Form 1096) by February 28th 2012. If you are electronically filing form 1099, then last date to submit form to IRS is April 2nd 2012
  
• A non-corporate entity includes individual sole proprietorship, partnership or limited liability company (LLC). Additionally a Form 1099-MISC is required for services paid to attorneys regardless of their entity type.
  
• Examples of payments that might require a 1099-MISC would be rents, attorney fees, contract labor, director fees, commissions, royalties (when payments exceed $10) and any compensation not included on W-2.

A business should use form 1099-misc to report any payments they have made in the course of their business. A 1099 misc form is issued by businesses to individuals/ independent contractors to whom they have paid $600 and more. If you are unsure weather you are legible to file form 1099 misc or which 1099 form should you file, contact 1099online.com an IRS certified efile provider to efile your 1099 forms and answer your queries on 1099 form filing.

2011 NEW COST BASIS COMPLIANCE LEGISLATION FOR FORM 1099-B

New federal requirements for cost basis tax reporting enacted in October 2008 require intermediaries to submit accurate and timely cost basis information to investors and the IRS. The change is the result of a government effort to end under and over reporting of capital gains and losses, while raising revenue to support The Emergency Economic Stabilization Act.

As a result of the new legislation, financial intermediaries will be required to report cost basis information to investors and the Internal Revenue Service for:

• Equity securities transactions on or after January 1, 2011.
• Mutual funds and dividend reinvestment plans on or after January 1, 2012.
• Debt securities, options and other specified securities on or after January 1, 2013.

The new regulations present an enormous challenge to brokers, banks, issuers, transfer agents, mutual funds and other intermediaries who must now prepare to provide cost basis information to millions of individual investors as well as the IRS. They must choose whether to build an in-house solution, buy a service from an industry vendor, or partner with a cost basis service provider. Firms need to focus on this now if they are to meet the deadlines set by Congress.

The new compliance requirement

The Emergency Economic Stabilization Act of 2008, enacted mainly to establish the

$700 billion bailout package contains new and stringent requirements on financial intermediaries such as issuers, transfer agents, brokers, banks, and mutual funds. In essence, the new legislation is an expansion of longstanding requirements that brokerages and mutual fund companies report gross proceeds. It has the practical effect of augmenting standing 1099-B income-reporting forms that brokerages are already required to submit simultaneously to investors and the IRS.

Schedule for implementation

The legislation establishes three stages of implementation for cost basis reporting:

• All equity stock acquired on or after January 1, 2010.
• All mutual funds and dividend reinvestment plans (DRiP) shares acquired on or after January 1, 2012.
• Other specified securities types, such as debt issues, options, private placements acquired on or after January 1, 2013.

BROKERS AND BANKS:

Compliance

Brokers, custodians and banks (herein referred to as brokers) have three years to implement systems upgrades to track and capture the adjusted cost basis information for securities transactions that occur for securities acquired on or after January 1, 2011, for form 1099-B reporting.

The form 1099-B will change to include the new information for adjusted cost basis. Brokers reporting directly to the IRS and the shareholder will need to retool the form printing process. Also, brokers must determine if they will buy, build or partner to handle the complexities of implementing an adjusted cost basis accounting system.

TRANSFER AGENTS

Compliance

Like issuers, commercial transfer agents will be required to report adjusted cost basis to the shareholder and the IRS through the updated form 1099-B. Transfer agents who are required to track and report adjusted cost basis include:

1. Transfer agents who administer dividend reinvestment plans, employee stock option plans (ESOP) and other such plans
2. Transfer agents who report gross proceeds of a sale of a security to a shareholder, and,
3. Generally, those transfer agents who now distribute form 1099-B.
   

For equity issues, transfer agents must begin to report adjusted cost basis on or after

January 1, 2011. For shares accumulated in dividend reinvestment plans, and possibly other plans such as ESOPs, transfer agents have until January 1, 2012 to begin reporting adjusted cost basis. Transfer agents that administer issuer-sponsored or “bank”-sponsored plans, (reinvestment plans, ESOPs and the like), will be required to report adjusted cost basis on the new 1099-B forms.

The form 1099-B will change to include the new information for adjusted cost basis.

Transfer agents reporting directly to the IRS and the shareholder will need to retool the form printing process.

EQUITY ISSUERS:

Compliance

The legislation obligates “brokers” to report adjusted cost basis to shareholders and the IRS for equity securities that have been acquired on or after January 1, 2011. The term broker is used generically in the legislation and can be misleading. The term refers to all financial intermediaries who report 1099-B financial information to shareholders. These intermediaries will be required to report adjusted cost basis. As the legislation is currently understood, those intermediaries include, but are not limited to, issuers, transfer agents, mutual funds, brokers, banks, and other custodians.

Issuers who will shoulder the additional burden of tracking and reporting adjusted cost

basis include:

1. Issuers acting as their own transfer agent
2. Issuers who administer their own dividend reinvestment plan, employee stock option plans (ESOP) and other such plans
3. Issuers who report gross proceeds of a sale of a security to a shareholder, and
4. Generally, those issuers that now report form 1099-B

For equity securities, issuers must begin reporting adjusted cost basis on or after January 1, 2011. For shares accumulated in dividend reinvestment plans, and possibly other plans, such as ESOPs, issuers have until January 1, 2012 to beginning reporting adjusted cost basis.

PENALTIES FOR INNACURATE REPORTING

The penalties can be very high, especially for those intermediaries that report inaccurate cost basis for a high number of investor/shareholder accounts. The penalty is $100 for each incorrect form 1099-B; $50 for the incorrect form sent to the investor/shareholder, and $50 for the incorrect form sent to the IRS. The maximum penalty is $350,000 a year.

About 1099online.com

1099online.com offers you quick and simple efiling of 1099-B forms through our advanced and secure efiling software. No need to download the software and no need to register yourself with the IRS FIRE system. It takes 3 simple steps to efile 1099-B form on 1099online.com and too for a cost as low as $0.55 per recipient. 1099online.com is an IRS certified efile provider to file 12 different 1099 forms which include 1099 misc form, 1099 K, 1099 INT, 1099 DIV, 1099 A, 1099 B, 1099 C, 1099 S, 1098, 1099-patr, form W2G and etc.

New form 1099 filing due dates and penalties for year 2011-2012

In less than a week, businesses would have to gear up to file their 1099 forms. 1099 forms were basically started by the government as an effort to curb the tax gaps that are taken place. The reason why tax gap had occurred was because of the income earned by non employees/freelancers and thus was gone unreported to the government. Hence 1099 forms were designed so that any payments of $600 and above made to independent contractors was reported on 1099 forms and thus filed with the IRS for the income tax purposes.

It is very necessary that 1099 forms are filed correctly and on time. If both these conditions are not met, then one can face huge penalties. The new penalties for 2011 form 1099 for year 2012 are as under:

If you fail to file a correct 1099 form by the due date, and cannot show reasonable cause, you may be subject to a penalty that broadly falls under categories listed below:

• —        Failing to file by the due date and you don’t furnish reasonable cause to justify the delay
• —       Failing to file paper forms that are machine readable
• — Failing to include all required information
• —       Failing to meet electronic filing requirements
• —       Failing to include information that is correct
• —       Or failing to report TIN or reporting an incorrect TIN

The amount of the penalty is based on when the correct 1099 is filed:

—    $30 per return if you correctly file within 30 days of the due date (by March 30 if the due date is February 28). The maximum penalty is $250,000 per year ($75,000 for small businesses).

—    $60 per form if you correctly file more than 30 days after the due date but by August 1; maximum penalty $500,000 per year ($200,000 for small businesses).

—    $100 per information return if you file after August 1 or you do not file required information returns. In this case the maximum penalty is $1,500,000 per year ($500,000 for small businesses).

If you do not file corrections and you do not meet any of the exceptions to the penalty described above, the penalty is $100 per information return.

DUE DATES TO FILE 1099 FORM:

1. —        January 30^th 2012- Due date to provide 1099 form to recipient
2. —        February 28^th 2012 – due date to paper file 1099 form
3. —        April 2^nd 2012- Due date to electronically file 1099 form

2011-2012 brings new 1099 filing tax laws for Farmers.

A 1099 tax form is an informational reporting form which is required to be filed with the IRS if any payment of $600 and above has been made by businesses or individuals to independent contractors in year 2011. The type of payments that are legible to be filed on form 1099 are: Rent, health care payments, services offered by freelancers, attorneys, royalties, Payments to crew members by owners or operators of fishing boats and etc.

In the case of agricultural sector, a farmer would have to file tax form 1099 for year 2011 if they want to write off the cost of the custom hay baling they had done this year. Services that require a farmer to file a 1099 form include: painting the barn, hoof trimmers or certified crop consultants.

Services that exempt you from filing 1099 forms include hauling freight which means livestock hauling or grain hauling is not required to be reported on 1099 form. Moreover, 1099 filing is not required to be reported for the purchase of equipment parts, seeds or fertilizers. Also a farmer is not supposed to file a 1099 form is he spends less than $600.

It is very necessary that farmers maintain their books on the payments they have made for year 2011-2012 because if they fail they file 1099 forms with the correct information then it can cost them huge penalties and losses.

Failure to file a 1099 form, could cost a farmer fine of $100 per form. If the internal revenue finds out that it was a willful neglect on the part of the farmer to file the 1099 form, then it can result in greater costs for the farmer in the form of $250 per filing. Sadly, small farmers who are unaware of such information fail to file the 1099 forms and thus have to face great adversities.

If business is not incorporated, then a 1099 form is required for all service providers. If the farmers are not incorporated, then they need to ask the business doing the service for their social security number (SSN)

Moreover, if a farm owner acquired above $600 as rent, then it is mandatory to file a 1099 form. Farmers have to talk to their landlords in order to get their 1099 forms.

1099 forms were started by the IRS as a step to fill the tax gap. Most of the income earned by non employees/freelancers was being unreported and hence resulting in huge tax gap for thee government. In order to narrow the gap, Congress came up with the 1099 forms.

For year 2011-2012, a 1099 form has to be sent to the recipient no later than January 30th 2012. There are 3 copies of the 1099 form. One is kept by the payer, one is sent to the recipient and the other copy is filed with internal revenue service.  Businesses are supposed to file the 1099 form with the IRS no later than February 28th 2012. However if you efile 1099 form which obviously is a better choice, then the due date would be April 2nd 2012

Electronically filing a 1099 form is a very easy and effortless method as compared to the paper filing method. Nowadays IRS has made it compulsory for businesses who have to file 250 1099 forms to electronically file them. If you fail to do so, then penalties are imposed on you. Also if you are filing less than 250 1099 forms, still you are encouraged to efile as it is cost effective, quick, and secure and provide IRS confirmation in less time than anticipated.  You can either efile through the IRS website or make use of an IRS certified efile provider such as 1099online.com to efile your 2011 form 1099 efficiently.

 

 

 

How to get your 2011 form 1099 misc electronically filed in minutes

Every year businesses have to file 1099 misc forms with the IRS to report Incomes they have paid to independent contractors/individuals for services rendered by them. 1099 Misc forms are basically filed for those individuals who are not part of the company, yet have provided their services and thus have received $600 and above from the company in form of compensation.

Traditionally, form 1099 misc was filed by businesses using the paper filing method where you would have to manually enter all the data and submit it to the IRS along with form 1096. Paper filing method can turn out to be quite cumbersome and painful if there are hundreds of 1099 misc forms to be filed. Moreover, paper filing method can also turn out to be very costly as you would have to spend on postal stamps and mailing services. Not only that, but have you ever realized how much paper is wasted to file 1099 forms on paper. Millions of paper is wasted each year to file 1099 forms be it a new form or corrected form. Do you know what it means to waste so much paper? Wasting paper means we are wasting our environment. Thousands and thousands of trees are sacrificed just to produce few tons of paper. We eliminate trees, we eliminate our environment.

Hence in order to eradicate the complexities arising out of paper filing method for 1099 forms, IRS came up with the best solution ever; EFILE method of paper filing. Electronic method of paper filing is by far the most suitable solution to file 1099 forms. Efile method has not only helped to solve the problem of filing 1099 forms quickly but it’s one of the safest and easiest solutions for 1099 filing. On top of that, no paper usage means nil environmental damage. Moreover, if you efile 1099 misc form, it takes minutes to fill your form and submit it to the IRS. IRS receives your submission within the same day and sends you IRS acceptance confirmation within 24 hours.

Now, there are 2 methods to efile 1099 misc forms.  First method would be to efile 1099 misc form directly with the IRS FIRE system and the second step would be to efile 1099 misc form through an IRS authorized efile service provider.

STEPS TO EFILE 1099 MISC WITH THE FIRE SYSTEM:

1. Purchase and install a software program that will create and transmit 1099 forms in the proper electronic format.
   
   
2. Request a transmitter control code (TCC) by filling out IRS Form 4419, "Application for Filing Information Returns Electronically." You will need to provide basic information such as your business name and address. You also must include your Employer Identification Number (EIN). If you do not have an EIN, you must obtain one before submitting Form 4419.
   
   
3. Mail or fax the form to the IRS at least 30 days before the deadline for filing 1099s. The IRS will send your 5-character transmitter control code by mail once the application is approved.
   
4. Create an account on the FIRE system. You will enter your company name, company address, company phone number, contact name and email address. You can create the account before you get your transmitter control code.

5. Prepare your 1099 information for transmittal using the features of your software program.

6. Transmit your 1099 forms to the FIRE system once you have received your transmitter control code and entered it into your software program.
   

STEPS TO EFILE 1099 MISC WITH AN EFILE SERVICE PROVIDER

1. Select your preferred IRS certified efile provider for 1099 misc form filing

2. Register with the service provider

3. Select the 1099 misc form from the list of 1099 forms service offered by the service provider

4. Fill in your 1099 misc information.

5. Click on the Submit to IRS button and your returns are transmitted to the IRS. A confirmation email will be sent to you about the status of your submission

And that’s it……

Now, which one do you think is the easiest step of all? Second one, isn’t it? You don’t have to purchase any software; you don’t have to fill any 4419 form; you don’t have to go through any cumbersome steps. Using an efile service provider is so simple because you just have to fill out your information and they do the rest. They transmit your information to the IRS through the FIRE system and send you IRS acceptance e-mail. There are some providers such as 1099online.com who even print and mail 1099 misc forms to the recipients. However, before selecting on a service provider make sure they are IRS approved and have an IRS authorized logo on their website.