1 welcome ! 2012 nmasbo fall conference september 13, 2012 1099 filing and increased civil penalties...

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WELCOME !

2012 NMASBO FALL CONFERENCE

September 13, 2012

1099 FILING AND INCREASED CIVIL PENALTIES

By Carl Chavez

Internal Revenue Service

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DISCLAIMER

The information contained in this presentation is

current as of the date it was presented. It

should not be considered official guidance.

While every effort has been made to present

accurate and timely general information, this

presentation is not considered official

guidance by the IRS and does not attempt to

address a specific tax situation. Contact the

IRS or your tax advisor for more specific help.

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TOPICS FOR TODAY

• Form 1099-MISC

• Form W-9

• Backup Withholding

• Penalties

• IRS On-Line TIN Matching Program

• Filing Information Returns Electronically

(FIRE)

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FORM 1099-MISCMISCELLANEOUS INCOME

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FORM W-9

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PURPOSE OF FORM W-9

• Provide to every vendor who performs services for

your entity

• Used to obtain an identifying number of a vendor

• Identifies type of business operation - i.e. Sole

Proprietor, LLC, Corporation, Partnership

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FORM W-9 – TYPES OF ENTITIES

• Sole proprietor uses SSN

• Corporations, partnerships and estates – use EIN

• LLC – Name must match SSN or EIN

• Certifies TIN is correct

• Payee certifies he/she is not subject to backup

withholding or is exempt

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LLCS AND REPORTABLE PAYMENTS

• May be a partnership or a corporation

• Secure a Form W-9 to determine its status

• Providing legal, medical and/or health services

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BACKUP WITHHOLDING

• Internal Revenue Code section 3406

• Required to withhold if

• Payee failure to furnish valid TIN requires immediate

withholding

• Received a CP2100 or CP 2100A notice from the IRS

• Some exceptions

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INFORMATION RETURNS REQUIRING BACKUP WITHHOLDING

• 1099-MISC

• 1099-INT

• 1099-DIV

• 1099-B

• 1099-OID

• 1099-PATR

• 1099-K

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EXCEPTIONS

• Tax-exempt organizations

• Other government entities, including foreign

governments

• Most corporations (see exceptions)

• Financial institutions

• International organizations

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WHEN TO BEGIN BACKUP WITHHOLDING

• Aggregate payments for the calendar year equal or

exceed $600

• Immediately if in the preceding year you were

required to

-issue a related information return, or

-impose backup withholding on such payments

• Rate is 28% after May 28, 2003

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CP2100/2100A NOTICE

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FIRST “B” NOTICE

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SECOND “B” NOTICE

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NOTICE 972-CG

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WHEN TO STOPBACKUP WITHHOLDING

• Failure to Furnish TIN - stop within 30 calendar days

of payee furnishing correct TIN

• Notice from IRS (incorrect TIN) - stop withholding

within 30 calendar days after you receive a certified

Form W-9

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REPORTINGBACKUP WITHHOLDING

• Report withholding to payee and to IRS in Box 4 of

Form 1099-MISC

• Reporting required even if the amount of the

payment is below the normal threshold for filing

Form 1099

• Send copy A of all paper Forms 1099 to the IRS

with Form 1096

• Total withheld reported on Form 945

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FORM 945

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FORM 945

• Without Payment: Ogden, Utah 84201-0042

• With Payment: PO Box 660443, Dallas, Texas

75266-0443

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BACKUP WITHHOLDING RESOURCES

• Form W-9

• Instructions for the Requester of Form W-9

• Publication 1281 – Backup Withholding for

Missing and Incorrect Name/TIN(s)

• Instructions for Form 945

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COMMON ERRORS

• Failure to obtain correct identifying information

• Failure to aggregate payments

• Assuming payee is a corporation

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INFORMATION RETURN DUE DATES

• January 31 – most information returns due to

recipient

• February 15 – for Form 1099-MISC, if amounts

reported in box 8 or box 14

• February 28 – paper returns due

• March 31 – electronically filed returns due

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FAILURE TO FILE PENALTIES

• Correctly file within 30 days after the due date – $30 per return with $250,000 cap

• On or before August 1 – $60 per return with $500,000 cap

• No return filed or correctly file after August 1 – $100 per return with $1.5 million cap

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FAILURE TO FURNISH PAYEE STATEMENTS

• $100 per statement, no matter when the correct statement is furnished

• May be reduced for failures corrected:• Within 30 days after the due date: $30 per return• On or before August 1: $60 per return

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FURNISHING FORMS ELECTRONICALLY

• Most information returns can be furnished to

recipients electronically

• Recipient must consent

• Without consent, payer must send paper form

• Specific procedures provided in Publication 1179.

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REQUIRED STATEMENT TO RECIPIENTS

Must have the following:

• If consent is not provided, a paper copy will be

provided

• The scope and duration of the consent

• How to obtain a paper copy after giving consent

• How to withdraw the consent

• Conditions under which electronic statement will no

longer be furnished

• Procedures to update recipient information

• A description of required hardware and software

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ABATEMENT OF PENALTIES

• Must be for reasonable cause; cannot be due to

willful neglect

• May make the request after penalty is assessed

Reasonable Causes

• Significant mitigating factors

• Failure was due to events beyond filer’s control

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IRS ONLINE TIN MATCHING PROGRAM

• Available to payers who file information returns

subject to backup withholding

• Free for registered users

• Quick verification of Name/TIN combinations

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TAXPAYER IDENTIFICATION NUMBERS (TINS)

• Social security number (SSN)

• Employer identification number (EIN)

• Individual Taxpayer Identification Number (ITIN)

• Adoption Taxpayer Identification Number (ATIN)

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ONLINE MATCHINGINFORMATION RETURNS

• 1099-B, Proceeds from Broker and Barter Exchange Transactions

• 1099-DIV, Dividends and Distributions• 1099-INT, Interest Income• 1099-K, Merchant Card and Third-Party Network

Payments • 1099-MISC, Miscellaneous Income• 1099-OID, Original Issue Discount• 1099-PATR, Taxable Distributions Received From

Cooperatives• SSNVS Handbook

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ELIGIBLE USERS

• Payers or their authorized agents

• Authorized Agent - employee or external vendor

contracted to transmit information on behalf of the

governmental entity

• Authorized agent not required – you can register and

use it yourself

• Individual must be approved by the principal and

registered

• Service not to be used for any other purpose

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ADVANTAGES OF USING TIN MATCHING

• Fast and reliable verification

• Free

• Individual records can be printed

• Submissions may meet reasonable cause regarding

penalty relief

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REQUIREMENTS TO PARTICIPATE

• Filed an information return in the past two years

• Comply with all terms of Revenue Procedure

2003-9• Transmit only name/TIN combinations for which

you will make payments• Transmit only combinations you have not

previously requested• Maintain confidentiality of information• Provide IRS information necessary to monitor

program

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METHODS TO SUBMIT REQUESTS

Interactive

• Submit up to 25 name/TIN combinations on-line

• Up to 999 combinations per day

• Response in real time (normally about five seconds)

Bulk

• Submit a text file with up to 100,000 name/number

combinations per submission

• Receive a response to a secure mailbox within 24

hours

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RESPONSE CODES

• 0 – Match• 1 – Missing or incorrect TIN• 2 – TIN not currently issued• 3 – Does not match• 4 – Invalid request• 5 – Duplicate request• 6, 7, 8 – TIN type unknown, but matches SSN or

EIN records, or both

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EFFECT ONBACKUP WITHHOLDING

• Mismatch does not constitute a backup withholding

notice (CP2100 or CP2100A)

• Does not affect backup withholding already in effect

for that payee

• May establish reasonable cause for penalty

abatement

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ABATEMENT REQUEST

REQUIREMENTS

• Provide a legible copy of original transaction

• Penalty assessed after date of transaction

• Request abatement in writing

• Request abatement only of failure to file correct

information return

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REGISTRATION

• “Principal” for the organization must initiate

registration

• Each designated user receives a token at home

address – must validate within 28 days of initial

registration

• When all users are confirmed, principal completes

registration

• To register: search for e-services on IRS.gov

• See Publication 2108A or call 1-866-255-0654

(01-512-416-7750 for international callers)

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FIRE SYSTEM

• Filing Information Returns Electronically (FIRE)

• Available to all filers; use required for larger-volume

payers

• Benefits

• Paperless

• Secure

• Easy to use

• Efficient

• Fast

• Flexible

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WHO CAN USE THE FIRE SYSTEM?

• Available to all filers of Information Returns

• REQUIRED where filing 250 or more Information

Returns

• Status of filing available within 2 days

• Due date of filing is later than paper filing for most

returns

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FIRE FILING REQUIREMENTS

• Software required to file in proper format

• Submit Form 4419

• Create your FIRE Account

• List of Approved IRS e-file for Business Providers

available at www.irs.gov and Publication 1582

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ELECTRONICALLY FILED INFORMATION RETURNS

• Form 1042-S

• Forms 1097 and 1098

• Form 1099

• Forms 3921 and 3922

• Form 5498

• Form 8027

• Form 8935

• Form 8955-SSA

• Form W-2G

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ELECTRONIC FILING REQUIREMENT

• 250 + applies to each type of form

• Applies separately to original & corrected returns

• Complete online Form 8809 to request an

extension for filing information returns via FIRE

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FIRE SYSTEM RESOURCES

• Publication 3609

• Publication 1220

• Publication 1187

• Publication 1287

• FIRE web page on www.irs.gov

• Customer Service: 866-455-7438• Monday-Friday 8:30-4:30 ET

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THANK YOU!

Send comments or questions to

tege.fslg.feedback@irs.gov

FSLG website: www.irs.gov/govt/fslg

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Encore Presentation

If you are interested, or if you know someone who could

not attend today’s presentation and would like to

attend a Free Webinar (encore presentation), it will be

airing next Thursday, September 20, 2012 at 12:00

MST. You may e-mail me your request, or give me

your business card with your e-mail address, and I will

send you an invitation tomorrow. It will give you all the

information to register. You basically received a

preview today of what will be airing across the nation

next week.

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Contact Information

Carl M. Chavez

5338 Montgomery Boulevard NE

Mail Stop 4505-ALB

Albuquerque, NM 87109

(505) 837-5610

carl.m.chavez@irs.gov