WELCOME !
2012 NMASBO FALL CONFERENCE
September 13, 2012
1099 FILING AND INCREASED
CIVIL PENALTIES
By Carl Chavez
1
Internal Revenue Service
DISCLAIMER
The information contained in this presentation is
current as of the date it was presented. It
should not be considered official guidance.
2
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.
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-MISC
MISCELLANEOUS 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 STOP
BACKUP 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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REPORTING
BACKUP 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
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• A description of required hardware and software
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 MATCHING
INFORMATION RETURNS
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• 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
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
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• Receive a response to a secure mailbox within 24
hours
RESPONSE CODES
•
•
•
•
•
•
•
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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
EFFECT ON
BACKUP 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
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• See Publication 2108A or call 1-866-255-0654
(01-512-416-7750 for international callers)
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
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• Flexible
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
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• Form W-2G
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
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