Now is the time to review your financial reports and determine if you have all the information that you need to get thru the tax filing process easily and smoothly!
You will need to assess if all individuals (Independent Contractors), who performed a service for your business, have submitted the required W9 and that is is completely filled in and you have the Name, Tax ID Number and Mailing Address correctly entered into your reporting software.
The very best time to acquire that coveted W9 form is when you first hire an individual to perform a service for your company! The next best time is when you have a check ready to hand them, as soon as they complete the required tax form.
The worst time to try to obtain the required tax forms is in January of the following year! This puts a lot of undue stress on you, the payor, and the payee has no real incentive to produce the required information.
You will want to review all payments, made in the calendar year, to any expense accounts that relate to services rendered, rent, legal fees, etc. Don’ be misled by the “paid at least $600” in the tax guide. You should have the information from the very start, so that any year when you pay the individual, you can report (or not based on the current threshold).
1099-MISC forms go to Independent contractors who have been paid at least $600 and do not do business as a corporation. They must receive this form by January 31, 2014.
Check the Vendor setup in your QuickBooks or Sage 100 ERP (formerly MAS 90/200) software! These forms can be printed painlessly from your software, but you have to have it setup correctly from the beginning of the year for the totals to be correct!
If you were not provided with the contractor’s Taxpayer Identification Number (Tin), then backup withholding on their payments should have been made. Backup withholding should be reported to the IRS by January 31st, on Form 945.
You must file electronically through the IRS’ FIRE system if you file 250 or more 1099-MISC forms. File Form 4419 at least 45 days before the return’s due date to allow the IRS to respond and process applications.
TIN matching allows payers to verify that the TIN and contractor’s name match. The IRS website will allow you to verify up to 25 TINs at a time on screen.
The IRS is implementing on a permanent and voluntary basis a pilot project that allows filers to truncate the first five digits of a TIN. TTINs as they are now called look like this XXX-XX-1234 but cannot be include on the IRS’ copies. You may use them on payees’ paper copies or their electronic copies.
Consider providing recipients with 1099-MISC forms electronically, but they recipients must consent. Potential recipients include:
- Outside accountants, lawyers, and sales representatives
- Auto mechanics and auto repair stations that service company cars
- Plumbers, electricians, painters, carpenters, tech consultants, repair workers or janitorial services
- Equipment/office/company car lessors
When service providers have the words “Corporation,” “Corp.,” “Incorporated,” or “Inc.” on letterhead, business cards or invoices, it means they are a corporation and a 1099-MISC is not necessary. Sole proprietorships, partnerships and attorneys who do business as corporations need the 1099-MISC form. Sending out more forms than necessary is better than receiving penalties for sending out fewer.
To use the 1099 Wizard in QuickBooks, see this Blog Article.
To use Sage 100 eFiling and Reporting, see this Blog Article.
As always, if you need help with the software setup or generating these required tax forms, contact us at 760-722-6839 to schedule an appointment.