Thoughtware

Article 09/25/2018

Information Reporting Reminders & Best Practices

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BKD 2018 Tax Advisor

Organizations that make wage payments to employees, and certain payments to nonemployees, are required to report these transactions to the IRS. Copies of these returns also must be provided to the payment’s recipient. While Form W-2 is one of the most recognizable tax information returns, there are numerous transactions a taxpayer can participate in that also require a tax information return to be filed. The reporting rules depend on the type of payment made. See the table below for a summary of filing requirements for the most common nonwage information returns.

 

Form

 

Reported Information

 

Reporting Threshold

 

Due Date

 

1099-MISC

 

Box 1 – Rents

Box 2 – Royalties

Box 3 – Other Income

Box 10 – Crop Insurance Proceeds

 

Payments of $600 or more; $10 or more for royalties

 

To IRS: February 28*

To Recipient: January 31

 

1099-MISC

 

Box 7 – Nonemployee Compensation (NEC)

 

Payments of $600 or more

 

To IRS & Recipient:

January 31

 

1099-INT

 

Interest paid on a business debt

 

Payments of $10 or more**

 

To IRS: February 28*

To Recipient: January 31

 

1099-DIV

 

Ordinary, qualified, capital gain & exempt-interest dividends

 

Payments of $10 or more**

 

To IRS: February 28*

To Recipient: January 31

 

Due date to IRS is March 31, if filed electronically
**A $600 reporting threshold applies in certain situations

 

If any of your Forms 1099-MISC reporting NEC (Box 7) will be filed with the IRS after the January 31 due date, you should separate the transmission of those forms from any non-NEC Forms 1099-MISC. Otherwise, the IRS will treat each transmitted form as if it’s subject to the penalty for failure to file by January 31—even though taxpayers have until February 28 (March 31, if filing electronically) to submit non-NEC Forms 1099-MISC to the IRS. On the other hand, two separate recipient statements aren’t required. You can furnish each recipient with a single payee statement reporting all Form 1099-MISC payment types.

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 Forms W-2 and 1099-MISC when reporting NEC in Box 7. Nonautomatic extension requests may be filed on Form 8809 for Forms W-2 and 1099-MISC reporting NEC, if certain criteria are met.


Information Reporting Best Practices

Penalties for filing incorrect information returns or failing to furnish the correct statements to recipients can typically range from $50 to $270 per return. If improper filing is due to intentional disregard, the penalty increases to at least $540 per return. If you have an information reporting filing requirement, consider the following best practices to help provide accurate and timely information to recipients and the IRS:

 

  • 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-year vendor listing for incomplete information and request a completed Form W-9, if necessary.
  • Familiarize yourself with payroll processor deadlines and provide a year-end adjustment in advance of the final payroll to avoid potential fees for unnecessary amendments of tax and wage reporting forms.
  • 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 vendors with “LLC”—limited liability company—in their name. For tax purposes, such vendors may be treated as partnerships, disregarded entities or corporations. Generally, payments to a corporation (including an LLC that’s treated as a C or S corporation) don’t have to be reported on Form 1099-MISC.
  • Verify the classification of the organization’s workers to assess whether the appropriate information return is filed, i.e. Form W-2 versus Form 1099-MISC.
  • 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 they’re below the 250-return threshold.

Contact Julia or your trusted BKD tax advisor if you have questions.