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.

1099 Forms Are Due Soon

It's a new fiscal year, which means it's time to start filling out and filing your 2012 1099 forms if you want a stress-free tax season.

As you probably know, small business owners file self-employment taxes every fiscal year.  Among the requirements: You have to file a 1099 form for any taxable income that doesn't show up on a W-2 form.

You can spend hours reading through the IRS' website about all the changes and updates. To help you out, here are three tips that every small business owner should know:

·         Make sure you send and receive the correct 1099 forms. There are many different types of 1099 forms, which the IRS refers to as "information returns." Most must be mailed to recipients this month, and then reported to the IRS in February. For employers who deal with independent contractors, Form 1099-MISC should be on your to-do list right now; you may also soon be receiving a Form 1099-K from each third-party payment processing service that you used in 2012.

·         1099-MISC forms should go out now. Business owners have until Jan. 31 to send out 1099-MISC forms to any individual who was paid $600 or more for services in the past year. This doesn't apply to corporations or LLCs that were paid for services, but it does apply to contract employees and individual contractors. You then have until the end of February to file the forms with the IRS. But make sure you give the payee time to review the 1099-MISC and correct any mistakes.

·         Pay attention to the 1099-K. This month, most businesses should receive a 1099-K from every payment processor you worked with during the year. This includes banks, credit card companies, and services like PayPal. The 1099-K was introduced last year, and it's only for businesses that sell more than $20,000 in goods or services through at least 200 transactions in a calendar year. Business owners should use their 1099-K forms as a way to check their calculations when completing their tax returns

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.

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