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Business Tax

1099s: 5 Key Reporting Changes for Businesses

According to the IRS, under-reporting of income is the biggest contributing factor to the IRS tax gap–the amount owed by individuals and businesses versus the amount that was actually paid in taxes. In 2006, the most recent year for which data are available, under-reporting across taxpayer categories accounted for an estimated $376 billion of the gross tax gap.

Overall, the IRS found that compliance is highest where there is third-party information reporting (1099 forms used to report taxable income earned that is not considered salary and wages) and/or withholding (W-2 forms). In the case of W-2 forms, the IRS found that a net of only 1% of wage and salary income was misreported; however, amounts subject to little or no information reporting had a 56 percent net misreporting rate in 2006.

In an effort to close that tax gap, the IRS has changed some reporting requirements for 1099s for tax year 2012. Here are some of those key changes:

1. 1099-MISC. Starting in 2012, compensation of $600 or more paid in a calendar year to an H-2A visa agricultural worker who did not give you a valid taxpayer identification number must be reported on 1099-MISC. You must also withhold federal income tax under the backup withholding rules. However, if the worker does furnish a valid taxpayer identification number, then report the payments on Form W-2.

2. 1099-B. New boxes have been added to Form 1099-B for reporting the stock or other symbol (box 1d), quantity sold (box 1e), whether basis is being reported to the IRS (box 6b), and state income tax withheld (boxes 13-15). Other boxes on the form have been moved or renumbered. In addition, brokers must report on Form 1099-B sales of covered securities by an S corporation if the S corporation acquired the covered securities after 2011.

3. 1099-C. The titles for boxes 1, 2, and 6 on Form 1099-C have changed. Box 1 is now Date of Identifiable Event; box 2 is now Amount of Debt Discharged; and box 6 is now Identifiable Event Code, and requires the entry of a code for the identifiable event. See Box 6–Identifiable Event Code. For 2012, all codes are optional except for Code A–Bankruptcy.

4. 1099-DIV. Exempt-interest dividends from a mutual fund or other regulated investment company (RIC) are now reported on Form 1099-DIV and are no longer reported on Form 1099-INT, Interest Income. Also, boxes 12 through 14 have been added to Form 1099-DIV to report state income tax withheld.

5. 1099-INT. Exempt-interest dividends from a mutual fund or other regulated investment company (RIC) are no longer reported on Form 1099-INT. Instead, those amounts are reported on Form 1099-DIV, Dividends and Distributions. In addition, boxes 11 through 13 have been added to Form 1099-INT to report state income tax withheld.

If you need help with 1099s this year, don’t hesitate to give us a ring. We’re happy to help you out.

Tax

Tax Due Dates for October 2012

Note: September due dates were extended to January 2013 for areas impacted by Hurricane Isaac. See article “Tax Relief for Those Affected By Natural Disasters” in this newsletter.

October 10 Employees who work for tips – If you received $20 or more in tips during September, report them to your employer. You can use Form 4070.
October 15 Individuals – If you have an automatic 6-month extension to file your income tax return for 2011, file Form 1040, 1040A, or 1040EZ and pay any tax, interest, and penalties due.

Electing Large Partnerships – File a 2011 calendar-year return (Form 1065-B). This due date applies only if you were given an additional 6-month extension. See March 15 for the due date for furnishing the Schedules K-1 to the partners.

Employers (nonpayroll withholding) – If the monthly deposit rule applies, deposit the tax for payments in September.

Employers (Social Security, Medicare, and withheld income tax) – If the monthly deposit rule applies, deposit the tax for payments in September.
October 31 Employers – Social Security, Medicare, and withheld income tax. File form 941 for the third quarter of 2012. Deposit any undeposited tax. (If your tax liability is less than $2,500, you can pay it in full with a timely filed return.) If you deposited the tax for the quarter in full and on time, you have until November 13 to file the return.

Certain Small Employers – Deposit any undeposited tax if your tax liability is $2,500 or more for 2012 but less than $2,500 for the third quarter.

Employers – Federal Unemployment Tax. Deposit the tax owed through September if more than $500.
Tax

Tax Due Dates for September 2012

September 10 Employees Who Work for Tips – If you received $20 or more in tips during August, report them to your employer. You can use Form 4070.
September 17 Individuals – Make a payment of your 2012 estimated tax if you are not paying your income tax for the year through withholding (or will not pay in enough tax that way). Use Form 1040-ES. This is the third installment date for estimated tax in 2012.

Corporations – File a 2011 calendar year income tax return (Form 1120 or 1120-A) and pay any tax due. This due date applies only if you made a timely request for an automatic 6-month extension.

S corporations – File a 2011 calendar year income tax return (Form 1120S) and pay any tax due. This due date applies only if you made a timely request for an automatic 6-month extension. Provide each shareholder with a copy of Schedule K-1 (Form 1120S) or a substitute Schedule K-1.

Partnerships – File a 2011 calendar year income tax return (Form 1065). This due date applies only if you were given an additional 5-month extension. Provide each shareholder with a copy of Schedule K-1 (Form 1065) or a substitute Schedule K-1.

Corporations – Deposit the third installment of estimated income tax for 2012. A worksheet, Form 1120-W, is available to help you make an estimate of your tax for the year.

Employers – Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments in August.

Employers – Social Security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments in August.
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