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

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

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 2013 and it also has to be reported to the IRS by April 1st 2013, if you are filing electronically.

Form 1099 K – FORM 1099-K which is used to report payment card and third party network transactions. 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 1st 2013.

 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 filiing deadline for paper filers is Feb 28^th 2013 and for electronic filers is April 1st 2013.







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Form 1099-K Payment Card and Third Party Network Transactions

Starting in January 2013, businesses that accept credit and debit cards when making sales to customers will receive an IRS tax form 1099 K from their credit card processing company. The 1099-K will report the total payment transactions for the year 2012. The new reporting requirement is part of on-going government efforts to increase collection of income tax.

Not only must banks and credit card processing companies comply with the new reporting requirement, third-party networks such as PayPal and eBay, Inc. must also report total credit card transactions to their business customers who use their services to process online sales. Compliance may prove to be a major adjustment for these entities. PayPal, a subsidiary of eBay, Inc., generated more than $31 billion in total net payments in 2009, according to eBay’s annual report for that year.

Exemptions

Not every merchant will receive a form 1099-K; only those who generated both a minimum of 200 transactions and $20,000 or more in sales. Casual sellers should keep in mind that even though they may not receive a 1099-K, their sales income is subject to income tax and must be reported on their tax return. Knowing whether your online garage sale qualifies as a business in the eyes of the IRS can be tricky. But if an online garage sale turns into a business with recurring sales and purchases of items for resale it may be considered an online auction business and the complexities can be manifold.

IRS provides penalty relief for 2011 form 1099-k filers

IRS has announced transitional relief from penalties for a section 6050W filer reporting incorrect information on information returns (Form 1099-K) and payee statements filed under section 6050W of the Internal Revenue Code. The relief provided by this notice is available for information returns and payee statements to be filed only in 2012, based on payments made in calendar year 2011, provided that the section 6050W filer makes a good faith effort to accurately file the appropriate information return and the accompanying payee statement.

1099-k form background:

Under section 6050W, added by section 3091 of the Housing Assistance Tax Act of 2008, Div. C of Pub. L. No. 110-289, 122 Stat. 2653 (the Act), a payment settlement entity (“payor”) making payment to a participating payee (“payee”) in settlement of reportable payment transactions must make an information return for each calendar year to be filed with the Internal Revenue Service setting forth the gross amount of such reportable payment transactions, as well as the name, address, and taxpayer identification number (TIN) of the payee. A similar statement must be furnished to the payee setting forth the gross amount of such reportable payment transactions, as well as the name, address and phone number of the information contact of the person required to make such return.

Section 6050W applies to two types of transactions: (1) payment card transactions and (2) third party network transactions. All payments made in settlement of payment card transactions must be reported in the manner described above.

Payments made in settlement of third party network transactions need be reported only if gross payments to a payee exceed $20,000 and the number of such transactions exceeds 200 with respect to the participating payee. The information is to be reported to the IRS on Form 1099-K, Merchant Card and Third Party Network Payments.

Section 6721 imposes penalties on a person for, among other things, failing to include all required information or including incorrect information on an information return. Section 6722 imposes penalties on a person for, among other things, failing to include all required information or including incorrect information on a payee statement. Sections 6721 and 6722 are applicable to section 6050W payers that must file information returns for payments made in settlement of reportable payment transactions.

However, In order to provide additional time to develop appropriate procedures for compliance with these new reporting requirements, the IRS will not impose penalties under sections 6721 and 6722 on payers that must file information returns and payee statements provided that they make good-faith efforts in filing accurate IRS Forms 1099-K and furnishing the accompanying payee statements.

This notice does not apply to a payer who erroneously fails to file information return or payee statement. Additionally, the relief provided by this notice only applies to information returns and payee statements pertaining to reportable payments (form 1099k) made in calendar year 2011.

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.

2011 form 1099-K report credit transaction

Starting 2012, any income that is received through credit and debit card transactions will have to be reported to the IRS by filing form 1099-K (Merchant Card and Third-Party Network Payments).

Financial institutions and merchant card service providers will have to report the annual gross payments which have been processed either through debit or credit card using form 1099-K to IRS and to the merchants. The 1099-K form format is unlikely to be similar to the 1099misc form which is used to report miscellaneous incomes earned by non employees/independent contractors/freelancers.

As the new development has already taken off considering that January 2012 has begun, it would be advisable that payment processors and business owners get ready, prepare the information they need and file form 1099-K and send a copy to the IRS and the recipients as early as possible.
Details of Credit Card and Merchant Payment Reporting

Banks and other payment settlement services will need to report gross annual receipts for each merchant. The income reporting will apply to "any transaction in which a payment card is accepted as payment". Thus, banks and other financial service providers will be reporting the total, gross amount of credit card and debit card payments for the year for each merchant.
Exception for De Minimis Payments

Reporting 1099-K form is not required if

• A merchant's total payment transactions for the year does not exceed $20,000, and 
• The total number of transactions does not exceed 200. 
• A withdrawal of funds at an automated teller machine (ATM) via payment card, or a cash advance or loan against the cardholder's account 
• A check issued in connection with a payment card that is accepted by a merchant or other payee. 
• Any transaction in which a payment card is accepted as payment by a merchant or other payee who is related to the issuer of the payment card.
  

How to prepare for credit card and third party payment reporting (FORM 1099-K)

Small businesses will want to review their bookkeeping and accounting practices. Once card payment reporting begins, business owners will need to reconcile the information reports submitted by the banks to their own books. Any discrepancies in reporting will need to be addressed so that accurate tax returns can be filed with the IRS.

One bookkeeping issue is clear; the new law requires banks to report gross receipts. However, merchants often have chargeback, issue refunds, or have debit card transactions where the customer receives cash back. Under the proposed regulations, banks and other payment transaction services will be reporting only gross monthly and annual payments. Fees, chargeback, refunds and other items will not be netted against these gross amounts for IRS reporting purposes. Accordingly, businesses should have thorough accounting procedures to keep track of these items separately. In other words, if you are accustomed to recording only a net deposit from a merchant account, it would be advisable to separate those net amounts into gross receipts and the associated fees and refunds. That way your internal financial reports can be more easily reconciled to the new Form 1099-K. 

Form 1099-K requires merchants to provide their full information

Since financial institutions will need to report credit and debit card receipts to the IRS, merchants will need to provide their payment processor with the full legal name of the business, their address, and taxpayer identification number. For most businesses, this will be their Employer Identification Number (EIN). As such, payment processors will likely request businesses to provide them with a Form W-9 to obtain this information. 

Possible Backup Withholding Issues

Merchants who fail to provide their taxpayer identification number could become subject to backup withholding at a rate of 28% on their payments. To prevent backup withholding, merchants should provide their card payment services provider with the name, address, and EIN for the business.

Another concern is that credit card transactions could become subject to backup withholding if a business commits fraud on their tax payments. Under the proposed regulations, the IRS made it clear that backup withholding would occur on gross card payments. This could leave a business in severe financial difficulties. Business owners who are struggling with tax debts should work with their tax professional to develop a repayment strategy that prevents any withholding on their card payments.