Any entity or individual conducting a trade or business that participates in a reportable transaction with another entity or individual during a calendar year must report to the IRS. The reporting taxpayer notifies the IRS of these transactions by filing applicable information tax returns accompanied by a transmittal form. Copies of these returns also must be provided to the other party participating in the transaction. Form W-2 is used to report wages, tips and other compensation paid to employees and is one of the most recognizable tax information returns. However, there are numerous transactions a taxpayer can participate in that also require a tax information return to be filed, each with its own filing requirements, due dates and reporting thresholds.
The table below summarizes filing requirements for the most common nonwage general information returns.
* Due date to IRS is March 31, if filed electronically
** A $600 threshold applies in certain situations
Extension for Filing Information Returns
Form 8809 is used to request a 30-day extension to file Forms W-2, 1099 and other information returns. One additional 30-day extension can be requested for all information returns except Form W-2. The IRS recently released a revised version of the form, which provides filers with four possible criteria for which an extension may be granted:
- A catastrophic event occurred in a presidentially declared disaster area that made the business unable to resume operations or made necessary records unavailable
- Fire, casualty or natural disaster affected business operations
- Death, serious illness or unavoidable absence of the individual responsible for filing the information returns affected business operations
- The business was in its first year of establishment
It’s important to note the automatic and additional 30-day extensions only affect the amount of time filers have to file the returns with the IRS. No extension is available for furnishing applicable statements to recipients.
Best Practices for Information Return Filers
Information returns serve an important role for the IRS, allowing it to cross-check the accuracy of tax returns filed by individual taxpayers. Also, penalties for filing incorrect information returns or failing to provide the correct statements to recipients can range from $50 to $260 per return—$530 if due to intentional disregard. Given these high stakes, it’s imperative filers of these returns provide accurate and timely information to recipients and the IRS. Here are several steps and best practices organizations can follow to prepare for the upcoming information return filing season:
- Review the organization’s accounts payable procedures to maintain proper documentation for vendors.
- Require all new vendors to complete Form W-9, Request for Taxpayer Identification Number and Certification, prior to remitting payment.
- Review the current vendor listing for incomplete information and request a completed Form W-9, if necessary.
- Review the organization’s general ledger and vendor listing to evaluate the overall filing requirement for each category of reported information. Pay particular attention to a vendor with “LLC” in its name, as the vendor may be classified as a partnership or disregarded entity for tax purposes, rather than a corporation.
- Verify the classification of the organization’s workers to assess whether the appropriate information return is filed. See BKD’s article on how to help distinguish between employees and independent contractors as well as a bright-line rule for making the determination.
- Electronic filing is mandatory for organizations required to file 250 or more information returns of the same type. However, the IRS encourages all filers to submit these returns electronically, even if below the 250-return threshold