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2016 Form 1099 Due Dates & Penalties

Every person engaged in trade or business must file an information return for payments made to another person for services performed in the course of the payer’s trade or business if the aggregate remuneration paid to the person is $600 or more in any tax year.   The return is made on Form 1099-MISC accompanied by Form 1096.

Form 1099-MISC, Box 7, reports non-employee compensation of $600 or more.  These amounts may include fees, commissions, prizes, awards, compensation for services performed, and certain other payments.   If the following four conditions are met, the payer generally must report payments in box 7 of Form 1099-MISC:

  1. The payment is made to someone who is not an employee of the payer
  2. The payment was made for services in the course of the payer’s trade or business
  3. The payment was made to an individual, partnership, estate and in the case of attorney’s fees, even corporations must receive a 1099.   Please note that LLC’s that have not file form 8832 and made an election to be taxed as a corporation are not exempt from information reporting requirements.   Attorney fees are always reportable, even if they are incorporated.
  4. The payer made payments to the payee of at least $600 during the year.

Other 1099s for Dividends (1099-DIV), Interest (1099-INT), for mortgage interest received (1098) may also need to be filed by certain taxpayers.

NEW FOR 2016

The 2015 PATH Act has accelerated the due dates for Form 1099-MISC, as well as W2’s effective for 2016 forms that are due in 2017.  ALL Forms 1099-MISC and Forms W2 must be filed by Jan. 31, 2017, without regard to how they are filed with IRS (1099’s) or SSA (W2’s).   There is no automatic extension of this due date. 

However, a 30 day extension may be obtained by requesting that on Form 8809.

https://www.irs.gov/pub/irs-pdf/f8809.pdf

PENALTY

The penalty amount for the non-filing or incorrect filing of Forms W2/W3 or 1099-MISC will be based on when the initial/correct form is filed.

  1. The initial penalty amount will be $50 per form for any form filed after the due date but within 30 days of the initial due date.  If the form is not correct and not corrected by Aug. 1, it will be considered not filed and subject to the late filing penalties.  The maximum late filing penalty is $532,000 per year.
  2. Any Form W2 or Form 1099-MISC filed after the 30th day from the initial due date but on or before August 1st will be subject to a $100 per form penalty.  The maximum penalty is $1,596,500 per year.
  3. If Form W2 or 1099-MISC is filed after August 1st, the penalty is $260 per form.  The maximum penalty is $3,193,000 per year.
  4. An intentional disregard for the rules is subject to a $530 per form penalty with no maximum.

Before paying any outside or service person it is advisable to have them complete and sign a Form W-9 so that you will have the info available in the event a 1099 is required. 

https://www.irs.gov/pub/irs-pdf/fw9.pdf

2018 Can Unreimbursed Employee Expenses be Deducted?

Can unreimbursed employee expenses be deducted?

            No, not for a W2 employee. Any of the 2017 expenses and years prior that were subject to a 2% of AGI limitation are no longer deductible.

            Yes, for independent contractors.

            Yes, for Statutory employees.

The best example of a Statutory Employee is an outside insurance agent.

Statutory Employees | Internal Revenue Service

https://www.irs.gov/.../statutory-employees

Apr 23, 2018 · Statutory Employees. An individual who works at home on materials or goods that you supply and that must be returned to you or to a person you name, if you also furnish specifications for the work to be done. A full-time traveling or city salesperson who works on your behalf and turns in orders to you from wholesalers, retailers, contractors,...

I have never seen a mortgage agent classified as a statutory employee.

Now, what if you are both a W2 employee AND an independent contractor?

            No for employee expenses.

            Yes for independent contractor expenses.

BUT we are talking about the same business field. It would be fair if unreimbursed expenses should are pro-rated……

i.e. W2 $80k       Form 1099 Independent $5k

Expenses $4k

$80 + $5 = $85k

$4k/85k = 4.7%

4.7% x $4k expenses = $188 Sch C expenses to reduce the $5k F1099.

 

SUB S OWNERSHIP CHANGE

If a shareholder terminates his or her interest in an S corporation during the tax year, the S corporation, with the consent of all affected shareholders (including those whose interest is terminated), may elect to allocate income and expenses, etc., as if the corporation’s tax year consisted of 2 separate tax years, the first of which ends on the date of the shareholders termination.

To make the election, the corporation MUST attach a statement to a timely filed original or amended Form 1120S for the tax year for which the election is made. In the statement the corporation must state that it is electing under section 1377(a)(2) and Regulations section 1.1377-1(b) to treat the tax year as if it consisted of 2 separate tax years. The statement must also explain how the shareholder’s entire interest was terminated (e.g., sale or gift), and state that the corporation and each affected shareholder consent to the corporation making the election. A single statement may be filed for all terminating elections made for the tax year. If the election is made, write “Section 1377(a)(2) Election Made” at the top of each affected shareholders Schedule K-1.  If not filed on the original due date, an extension must be filed or else the actual filing will not be considerd timely.

Exchange - not Sale to defer tax

SUMMARY OF IRS LINK       https://www.irs.gov/uac/like-kind-exchanges-under-irc-code-section-1031

You cannot sell ANYTHING and defer taxes…

You can EXCHANGE (qualified intermediary is hired.. you don’t get your hands on the money)… subsequent property is identified within 45 days… and have a total of six months from sale date to purchase like kind property.

When the exchange is done, if you received boot (money, cars, debt forgiveness in excess of debt assumed), then you are taxed on a part of the boot.

The old rules of selling a primary and reinvesting the proceeds in a home of equal or greater value are gone.

AND, it did not apply to a vacation home anyway, only a primary.

Required Minimum Distributions RMD

HEIR HAZARDS when INHERITING an IRA
 
RMD (Required Minimum Distribtutions) are required when the owner turns 70 1/2 years old.
 
NON-SPOUSE beneficiaries can 'stretch' the regular inherited IRA over their own life expentancy but must start the RMD the year following the death of the owner.
 
While ROTH IRA owners never are required to distribute RMD, NON-SPOUSE beneficiaries must.  Those withdrawls are still tax free.

Accountable vs Unaccountable Vehicle Plans

Two kinds of vehicle plans

ACCOUNTABLE PLAN

Employee hands employer expense report showing X business miles. Employer reimburses X for that amount up to the approved business mileage rate per mile for that year. Done. Employer gets the deduction. Employee is not taxed.

UNACCOUNTABLE PLAN

Employee receives X per month with no accounting to the employer. Employee is taxed on X for both FICA and Income Tax. The legitimate documented business miles is a deduction for the employee in 2017 and prior years (maybe, depended on a lot of things on his/her personal return as to whether they actually received a tax benefit).

BUT new tax law for 2018 does not allow a W2 employee to deduct anything for unreimbursed employee expenses. So, the employee is taxed on the per diem, period. Employer is deducting the per diem because it is a part of the W2. Employee has no deduction and actually pays tax on otherwise legitimate business deduction.

BEST METHOD

ACCOUNTABLE PLAN IS BEST. Employee is not taxed. Employer deducts the ACTUAL expenses with no payroll reporting.

Sub S Basis Reporting 2018 Forward

2018 Form 1040 U.S. Individual Income Tax Returns that have an S Corporation K-1 are required to check a box on line 28 of Schedule E to attach a basis computation.  This applies to corporations reporting a loss, stock disposal, receive a loan repayment or DISTRIBUTION!