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.

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.

FORM 1099 MISC COMPLETE GUIDE – 1099 misc forms, form 1099 misc filing requirements, 1099 misc form due dates and penalties.

Now and then, we see someone asking a query on yahoo answers, ask.com and other websites about 1099 misc form. When a person received 1099 misc form, they are surprised and immediately post ‘Why did I receive a 1099 misc form’? Not only that but the search engines and filled with questions regarding 1099 misc forms, 1099 filing requirements, best way to file a 1099 misc form, due dates and penalties for 1099 filing and more. The list of questions is endless.

So here I am today, ready to answer all your doubts and questions about 1099 misc forms.

WHAT IS FORM 1099 MISC?

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.

Personal payments are not reportable. You are engaged in a trade or business if you operate for gain or profit. However, nonprofit organizations are considered to be engaged in a trade or business and are subject to these reporting requirements. Other organizations subject to these reporting requirements include trusts of qualified pension or profit-sharing plans of employers, certain organizations exempt from tax under section 501(c) or (d), farmers' cooperatives that are exempt from tax under section 521, and widely held fixed investment trusts. Payments by federal, state, or local government agencies are also reportable.

IS FORM 1099 MISC VALID FOR EMPLOYEES OF A FIRM?

No, if you are employed by a firm or a registered corporation, then you are not suppose to file form 1099 misc. If you are providing services to a company as an employee and receive 1099 misc form, then it is a mistake on the part of your employer and you must correct it. As an employee, you are supposed to receive form W2 for your income tax purpose.

WHAT DO I DO WITH 1099 MISC FORM AFTER RECEIVING IT?

Because you are an independent business person, working for yourself and are not registered as acorporation, partnership or multi-owner limited liability company and you were professionally hired by a company on a contract basis; you are legible to receive form 1099 misc by January 31st2013. You would need that 1099 misc form to report your income to the IRS for your tax filing purposes.

Now when you get a 1099 misc form, take a look at Box 7, “Nonemployee compensation.” This is where your annual income from the company that hired you will be reported. And this is the income that you must be sure to include on your Schedule C, because not only did the company send you a 1099 misc form but also filed it with IRS. Hence, the 1099-MISC serves the same function for the self-employed as a W-2 does for the employee. It tells you and the IRS how much income you made from one company.

WHAT DO I DO IF THE AMOUNT ON THE 1099 MISC FORM IS INCORRECT?

In such case, you should contact the business who issued the 1099 to resolve the discrepancy. If they made a mistake, they must issue a corrected 1099 to both you and the IRS. To be safe, you should wait until you receive the corrected 1099 before filing your tax return. You need to be sure that the 1099 income amount agrees with your Schedule C income amount. If there is a difference between the total income on your 1099 misc form and the amount of income on your Schedule C, the IRS will eventually catch it and send you a letter demanding an explanation

I FILED MY TAX RETURN BUT AM YET TO RECEIVE MY 1099 MISC FORM?

There is no problem if you filed your tax return and received 1099 misc form after that as long as you reported your income on schedule C. But in, case you did not report your 1099 income, make sure you file an amended tax return. This will surely increase the amount of tax due and probably late payment penalties if you fail to pay your tax dues on time.

WHAT ARE THE PENALTIES FOR 1099 MISC FORM FILING?

The amount of the penalty is based on when you file the correct information return. The penalty is:

1) $30 per information return if you correctly file within 30 days (by March 30 if the due date is February 28); maximum penalty $250,000 per year ($75,000 for small businesses, defined below).

2) $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).

3) $100 per information return if you file after August 1 or you do not file required information returns; maximum penalty $1,500,000 per year ($500,000 for small businesses).

BY WHEN AM I SUPPOSED TO FILE AND REPORT 1099 MISC WITH THE IRS?

31st January 2013 – send misc 1099 form to the recipient

28th February 2013 – file form 1099 misc with IRS on paper

1st April 2013 – File form 1099 misc with IRS electronically

IF I WANT TO EFILE MY 1099 MISC FORM, HOW DO I SELECT THE SERVICE PROVIDER?

There are many service providers wanting to attract customers to file 1099s on their websites but there are certain requisites to look out for when filing form 1099 misc or any other 1099 forms. Below is the list provided:

1. Efile service provider should be IRS approved -look for IRS logo on the site
2. They should be safe and secure - look for security certificate on their website
3. offer user friendly navigation process to simplify your 1099 filing
4. offer reasonable and cost effective pricing. 
5. have customer support service - phone, email, etc. 

Now, we would recommend 1099online.com, as an efile service provider whom you should opt for to file your 1099 forms online. Not because we are 1099online.com, but because 1099online.com fulfills all the above and many more requisites that you should look out for when opting a 1099 filing service provider. Visit 1099online.com and find out yourself. 1099online.com supports efile for 12 different 1099s

This is a copyrighted© article written by ‘tax master’ who is associates with www.1099online.com. No permission is granted for commercial use. You may reproduce this article with written consent from the TRS Holdings, Inc, parent company of 1099online.com by emailing to wecare@1099online.com or by calling at 800-578-2290

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.

FORM 1099 MISC COMPLETE GUIDE – 1099 misc forms, form 1099 misc filing requirements, 1099 misc form due dates and penalties.

Now and then, we see someone asking a query on yahoo answers, ask.com and other websites about 1099 misc form. When a person received 1099 misc form, they are surprised and immediately post ‘Why did I receive a 1099 misc form’? Not only that but the search engines and filled with questions regarding 1099 misc forms, 1099 filing requirements, best way to file a 1099 misc form, due dates and penalties for 1099 filing and more. The list of questions is endless.

So here I am today, ready to answer all your doubts and questions about 1099 misc forms.

WHAT IS FORM 1099 MISC?

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.

Personal payments are not reportable. You are engaged in a trade or business if you operate for gain or profit. However, nonprofit organizations are considered to be engaged in a trade or business and are subject to these reporting requirements. Other organizations subject to these reporting requirements include trusts of qualified pension or profit-sharing plans of employers, certain organizations exempt from tax under section 501(c) or (d), farmers' cooperatives that are exempt from tax under section 521, and widely held fixed investment trusts. Payments by federal, state, or local government agencies are also reportable.

IS FORM 1099 MISC VALID FOR EMPLOYEES OF A FIRM?
No, if you are employed by a firm or a registered corporation, then you are not suppose to file form 1099 misc. If you are providing services to a company as an employee and receive 1099 misc form, then it is a mistake on the part of your employer and you must correct it. As an employer, you are supposed to receive form W2 for your income tax purpose.

WHAT DO I DO WITH 1099 MISC FORM AFTER RECEIVING IT?
Because you are an independent business person, working for yourself and are not registered as acorporation, partnership or multi-owner limited liability company and you were professionally hired by a company on a contract basis; you are legible to receive form 1099 misc by January 31st2012. You would need that 1099 misc form to report your income to the IRS for your tax filing purposes.

Now when you get a 1099 misc form, take a look at Box 7, “Nonemployee compensation.” This is where your annual income from the company that hired you will be reported. And this is the income that you must be sure to include on your Schedule C, because not only did the company send you a 1099 misc form but also filed it with IRS. Hence, the 1099-MISC serves the same function for the self-employed as a W-2 does for the employee. It tells you and the IRS how much income you made from one company.

WHAT DO I DO IF THE AMOUNT ON THE 1099 MISC FORM IS INCORRECT?

In such case, you should contact the business who issued the 1099 to resolve the discrepancy. If they made a mistake, they must issue a corrected 1099 to both you and the IRS. To be safe, you should wait until you receive the corrected 1099 before filing your tax return. You need to be sure that the 1099 income amount agrees with your Schedule C income amount. If there is a difference between the total income on your 1099 misc form and the amount of income on your Schedule C, the IRS will eventually catch it and send you a letter demanding an explanation

I FILED MY TAX RETURN BUT AM YET TO RECEIVE MY 1099 MISC FORM?
There is no problem if you filed your tax return and received 1099 misc form after that as long as you reported your income on schedule C. But in, case you did not report your 1099 income, make sure you file an amended tax return. This will surely increase the amount of tax due and probably late payment penalties if you fail to pay your tax dues on time.

WHAT ARE THE PENALTIES FOR 1099 MISC FORM FILING?
The amount of the penalty is based on when you file the correct information return. The penalty is:

1) $30 per information return if you correctly file within 30 days (by March 30 if the due date is February 28); maximum penalty $250,000 per year ($75,000 for small businesses, defined below).

2) $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).

3) $100 per information return if you file after August 1 or you do not file required information returns; maximum penalty $1,500,000 per year ($500,000 for small businesses).

BY WHEN AM I SUPPOSED TO FILE AND REPORT 1099 MISC WITH THE IRS?
31st January 2012 – send misc 1099 form to the recipient
28th February 2012 – file form 1099 misc with IRS on paper
2nd April 2012 – File form 1099 misc with IRS electronically

IF I WANT TO EFILE MY 1099 MISC FORM, HOW DO I SELECT THE SERVICE PROVIDER?

There are many service providers wanting to attract customers to file 1099s on their websites but there are certain requisites to look out for when filing form 1099 misc or any other 1099 forms. Below is the list provided:

1. Efile service provider should be IRS authorized and certified -look for IRS logo on the site
2. They should be safe and secure - look for security certificate on their website
3. offer user friendly navigation process to simplify your 1099 filing
4. offer reasonable and cost effective pricing. 
5. have customer support service - phone, email, etc. 

Now, we would recommend 1099online.com, as an efile service provider whom you should opt for to file your 1099 forms online. Not because we are 1099online.com, but because 1099online.com fulfills all the above and many more requisites that you should look out for when opting a 1099 filing service provider. Visit 1099online.com and find out yourself. 1099online.com supports efile for 12 different 1099s

This is a copyrighted© article written by ‘tax master’ who is associates with www.1099online.com. No permission is granted for commercial use. You may reproduce this article with written consent from the TRS Holdings, Inc, parent company of 1099online.com by emailing to wecare@1099online.com or by calling at 800-578-2290

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

1099 filing season starts January 2012

2 weeks more and that’s it…2011 ends after 15 days and we welcome 2012 in our lives with new beginnings, new activities, new promises and resolutions and not to forget a new filing season. January 2012 is not only a time for celebrations but also a time to gather your papers and yourself to begin your income tax filing. But before that, if you are self employed or provide your services on freelance basis, then your hiring company would definitely provide you form 1099 Misc. Wondering what is form 1099 misc and why should I receive it? Ok, so here’s the answer to that. 1099 Forms are basically designed for freelancers or self employed who render their services to companies and in return receive remuneration of $600 and above. If you fall into that category then a 1099 misc form is sure to come your way.

Once you receive 1099 misc form, then at the time of filing your income taxes with IRS, you have to show the 1099 misc form as well. This will allow you and the IRS to figure out your taxable income. 

As I said earlier, tax 1099 forms are designed for freelancers and independent contractors. A person falls under the category of an independent contractor/freelancer if he sets his own schedules, works at his own timings, location and is free to work for other individuals or businesses that suit his needs. If issues arise in any of the conditions or the person is being directed with any of the conditions then he is deemed as a employee of the company and is not liable to receive 1099 misc form but rather will receive a form W2 (for employees)

IRS Requirements for 1099 online filing

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 2nd 2012. 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.

Detailed information on different types of 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 4 types of 1099 forms:

Form 1099 Misc - The Form 1099-MISC is used to report miscellaneous income for individuals and companies who have been paid $600 or more in non-employee service payments during a calendar year. In other words, Form 1099 Misc is usually given to independent contractors such as attorneys, freelancers, health care service, performers, rent and etc who have provided their services to the company and in return have received compensation of $600 and above. 1099 forms are issued by the government to ensure that no income is gone unnoticed and hence is reported to the IRS for income tax purposes. Form 1099 Misc has to be given by the business to the payee by January 31 2012 and it also has to be reported to the IRS by April 2^nd 2012, if you are filing electronically.

Form 1099 K – A New 1099 form which is debuting from 2012 onwards is FORM 1099-K which is used to report merchant card and third party network payments. The form is required for reporting payment transactions.  Payment transaction is when a payment card (credit card) is used to make a payment or any settlement through a third party payment network such as e-bay, pay pal and etc. Thus, people who have a pay pal account, credit card account or any such similar account will receive 1099 K at the end of the year. Businesses would have to report 1099-K form only if they have gross receipts of $20,000 and above or 200 and above transactions. 1099online.com is the first company to go live with the e filing software for 1099 K forms.

Form 1099 Div – Form 1099 DIV ‘dividends and distributions’ is the official form which is used to report 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 1099 DIV 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.  Get more information on 1099- Div at http://www.irs.gov/pub/irs-pdf/i1099div.pdf

Form 1099 INT – The official 1099 INT form is issued by payers of interest income to investors at the end of the year. Payers have to issue the form to those they paid at least $10 of interest during the year. The payers in this case include banks and savings institutions. Interest income reported on Form 1099-INT includes interest paid on savings accounts, interest-bearing checking accounts, and US Savings bonds. This Form is also used to report other tax items related to your interest income, such as early withdrawal penalties and federal tax withheld. The form has to be filed with IRS by April 2^nd 2012.

 The next filing season for 1099forms starts January 1^st 2012. Businesses have to ensure that they provide the correct and required 1099 forms to the contractors/payee by January 31^st 2012. Businesses also have to efile 1099 forms with the IRS compulsorily. The filing deadline for paper filers is Feb 28^th 2012 and for electronic filers is April 2^nd 2012. 

This is a copyrighted© article written by ‘Diva A’ who is associates with www.1099online.com. No permission is granted for commercial use. You may reproduce this article with written consent from the TRS Holdings, Inc, parent company of 1099online.com by emailing to wecare@1099online.com or by calling at 800-578-2290

Form 1099 Misc is not the same as form W2

It’s the year end payroll filing season and you wondered why your company gives few people form W2 and to other it gives form 1099 misc? Well, Simple answer. Some people in the company are permanent employees and others are employed on a contract basis. What I mean to say is that if you receive form W2, it gives you the status of being a permanent employee of the company and if you receive form 1099 misc it suggests that you are self employed and your services are hired by the company on a contractual basis.

                                         

Businesses Report the income of their employees on Form W2. This form reports total income, Social Security and Medicare Income, and it reveal how much has been withheld from employee pay for federal, state and local taxes. Form W2 is given to the employees no later than January 31^st. Businesses have to efile form W2 of its employees with the IRS by March 31^st 2012 (As the filing deadline falls on Saturday, hence the IRS has changed the filing deadline to April 2^nd 2012). If you want to file through paper then the last date is February 29^th 2012. However, it is always advised that you opt for Efile over paper filing not because IRS recommends it but compared to paper filing, efiling is not at all complex but rather quick, and secure and IRS confirmation is sent via secure email in less time.

Unlike form W2, 1099 misc form is given by businesses to individuals whose services is hired for a short period of time on contract basis. Such individuals are called as independent contractors. Independent contractors are those individuals who do work for your company but who are not employees. You don't report withholding or Social Security/Medicare wages because you don't withhold income taxes for independent contractors and you don't deduct Social Security and Medicare from their payments. Businesses have to file form 1099 misc for independent contractors if income of $600 and above has been paid to them. 1099 misc has to be given to individuals no later than January 31^st 2012. 1099 forms have to be electronically filed with the IRS as well no later than April 2^nd 2012. Paper filing option is also open for which the last date is February 28^th 2012. However, it is always advised that you opt for Efile over paper filing not because IRS recommends it but compared to paper filing, efiling is not at all complex, quick, and secure and IRS confirmation is sent via secure email in less time.

Moreover, you can file electronically through the Filing Information Returns Electronically System (FIRE System); however, you must have software that can produce a file in the proper format according to Pub. 1220…It’s not that simple to use that software without any guidance. There are service providers for 1099 online filing but they only offer you the option to download the software and use it. That can be very complicating process and not a reasonable one. But one such IRS certified efile service provider that I came across is 1099online.com. You can efile and submit form 1099 Misc and other 1099 forms without having to download any software and without having any know about technicalities. 

So now that you know the difference between tax 1099 misc and form W2, you can know better which one is for you and why.

This is a copyrighted© article written by ‘tax master’ who is associates with http://www.1099online.com/. No permission is granted for commercial use. You may reproduce this article with written consent from the TRS Holdings, Inc, parent company of 1099online.com by emailing to wecare@1099online.com or by calling at 800-578-2290