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Tax Update on 1099s Alan Gregerson Senior Stakeholder Liaison March 2011 1099 Instructions • File Form 1099-MISC only when payments are made in the course of your trade or business. • You are in a „trade or business” if you operate for gain or profit. Rental Real Estate • Persons receiving rental income from rental real estate generally are considered to be in the “trade or business” of renting property. Corporations • Generally 1099-MISC for payments to a Corporation is not required • Reportable payments to Corporation must be reported on 1099-MISC are medical and health care payment reported in box 6, fish purchases for cash reporting in box 7, attorney fees reported in box 7, and gross proceeds paid to an attorney reported in box 14. Form 1099-Misc Filing Requirement • At least $10 in royalties or broker payments • At least $600 in rents, services (including parts and materials) , prizes and awards, other income payments, medical payments, cash payments for fish, gross amounts paid to attorneys. • Any back up withholding payments Form 1099-Misc Filing Requirement • Report payments of $600 or more paid to non-employees each year • Provide required copies timely to: – non-employee by January 31 – IRS by February 28 Form W-9 • Request for Taxpayer Identification Number and Certification • Use to obtain – Payee‟s Correct Name – Payee‟s Taxpayer Identification Number TIN Matching Program • Match payee name with W-9 • Match TIN with IRS records • Decrease backup withholding and penalty notices • Reduce the error rate in TIN validation • Requires registration in e-Services – Free – Available 24/7 Potential Penalties • Failure to provide TIN – $50 per occurrence – up to $250K each year • Trust fund – imposed when taxes withheld are not sent to IRS – 100% – may make payer liable for backup withholding 1099-K Reporting • Banks and other payment settlement entities report • There is no reporting requirement for individuals • Cardholders‟ personal information will not be shared with the IRS • Gross amount of reportable transactions reported Payment Settlement Entity • Payment card transaction – Merchant acquiring entity • Third party network transaction – Third party settlement organization General Requirements • Entities making payments to participating payees must report for each calendar year: – The gross amount of the reportable transactions and – The name, address and TIN of the participating payee Exceptions • De minimis payment rule for third- party payers • No reporting requirement: < $20,000 total payment transactions and < 200 transactions Questions?
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