Small businesses: Don’t neglect 1099-MISC and 1099-NEC filings

 Accounting & Taxation, Tax Tips  Comments Off on Small businesses: Don’t neglect 1099-MISC and 1099-NEC filings
Nov 012020
 

Penalties for failure to file 1099 documents (information returns) with the IRS and failure to furnish recipients with their copies have increased dramatically in recent years. In 2021, for small businesses (less than $5M in average annual receipts in the most recent three years), these penalties can run as high as $280 for failure to file plus $280 for failure to furnish – per document – up to a maximum penalty of $1,130,500 in the aggregate for each of these issues.

New for 2020 is the 1099-NEC to report non-employee compensation. This information was previously reported on 1099-MISC, but has now been split out onto a separate information return. Who must file 1099-NEC, and who must be furnished one? These are questions to ask of a qualified professional. Even individuals who own rental property may be subject to 1099-NEC (and 1099-MISC) reporting, depending upon circumstances.

If you have a payroll service, do not assume that 1099 preparation is included with your basic level of service! In most cases, your payroll service will be completely unaware of any subcontractors or others who must be furnished documents, and don’t expect your payroll service rep to be able to provide answers as to whom should be furnished a 1099.

Your checkbook management software likewise can’t provide any guidance for you in this regard.

Planning to do these internally? To be considered correctly filed, information returns must be complete and accurate. That means full names and addresses, ID numbers (TIN, SSN, etc.), amounts, and in the cases of forms W-2G, 1097-BTC, 1098, 1098-C, 1098-E, 1098-F, 1098-MA, 1098-Q, 1098-T, 1099-A, 1099-B, 1099-C, 1099-CAP, 1099-DIV, 1099-G (excluding state and local income tax refunds), 1099-INT, 1099-K, 1099-LS, 1099-LTC, 1099-MISC (excluding fishing boat proceeds), 1099-NEC, 1099-OID, 1099-PATR, 1099-Q, 1099-QA, 1099-R, 1099-S, 1099-SA, and 1099-SB, a valid telephone number providing direct access to an individual in a position to answer questions about the statement must appear somewhere on it. [N.B.: This is not a complete list of requirements. Please do not rely on this as any type of instruction guide.]

As a reminder, forms 1099-NEC are due out to recipients no later than January 31, and must be filed with the IRS no later than January 31, as well. Forms 1099-MISC are due out to recipients no later than January 31, and must be filed with the IRS no later than February 28. Extensions of time to file with the IRS are available (the first 30-day extension is automatic, but must still be submitted on Form 8809; a second 8809 may be submitted to request another 30 days), but there is no extension of time to furnish documents to recipients.

Generally, we prepare information returns for our business clients as part of our standard service portfolio. If you have a need for this service à la carte, we can surely discuss your needs. Contact us for more information.

2020 Year end tax planning for small businesses

 Accounting & Taxation, Current Events, Current Events, Tax Tips  Comments Off on 2020 Year end tax planning for small businesses
Oct 302020
 

2020 has turned many things upside down, not the least of which is year end tax planning. Where in years past, it was generally good strategy to accelerate deductions into the current year (and defer income, for those on cash basis), it might make more sense this year to wait on those larger expenditures until after January 1, and instead accelerate income (where possible) into 2020.

Rehiring? The Work Opportunity Tax Credit (WOTC) is slated to expire December 31. This is a one-time (use it or lose it) tax credit for hiring from targeted groups (long-term unemployed, veterans, vocational rehab referrals, and a few more). While this credit could be extended, we have heard nothing affirmative, so this may be your last chance to snag it.

These are topics for discussion with a qualified professional (do-it-yourself tax prep software or whatever software you might use to manage your business checking account can’t do this). We invite you to contact either of our offices for a consultation.

2020 Coronavirus (COVID-19) Economic Impact – Information for small businesses

 Accounting & Taxation, Current Events, Current Events, Tax Tips  Comments Off on 2020 Coronavirus (COVID-19) Economic Impact – Information for small businesses
May 042020
 

This is the second installment in our series directed to our clients who are financially affected by the 2020 Coronavirus pandemic.

This post focuses on information specific to small business financial assistance and compliance matters.

Due dates

Federal and State filings and payments

Please see the first article in this series and refer to the commentary there regarding filing due dates, as these apply to business filing deadlines, as well.

Reconciliation of Federal and State filing dates

Where applicable and as possible, we will be filing State extensions so as to take full advantage of the Federal postponement to July 15. This would pertain to those clients who have filings due to states which have not moved their due dates to at least July 15.

Note that some tax filings have no availability of extension (Sales and Use Tax is a good example). Please refer to the state information link in the first article in this series for additional information and a good reference for state information.

Paycheck Protection Program

Note that this Program was re-funded by Congress and the SBA resumed accepting applications from participating lenders on Monday, April 27, 2020 at 10:30am EDT.

The Paycheck Protection Program is in reality an SBA loan. As such, businesses must apply through a local bank or SBA lending institution for these funds. Specifically, any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Not all lenders are participating, so you should check with yours as to its status.

The Program provides for loan forgiveness if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities. Note that of the foregoing categories, at least 75% of loan proceeds must be used for payroll in order to qualify for forgiveness. Also, current IRS guidelines preclude the deductibility of any expenses which have been offset with forgiven loan money.

COVID-19-affected eligible businesses include:

  • Any small business concern that meets SBA’s size standards (either the industry based sized standard or the alternative size standard) – typically, this will cover more than just what most of us consider “a small business”;
  • Any business, 501(c)(3) non-profit organization, 501(c)(19) veterans organization, or Tribal business concern (sec. 31(b)(2)(C) of the Small Business Act) with the greater of:
    • 500 employees, or
    • That meets the SBA industry size standard if more than 500
  • Any business with a NAICS Code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location
  • Sole proprietors, independent contractors, and self-employed persons (but note that these entities must have one or more employees; this is not for independents without payroll expense – and payroll means payroll, not subcontractors)

When not forgiven, these loans have a 2 year term at 1% interest.

The loan application itself may be downloaded here, though you should request your lender’s form for filing.

Lenders participating in the Paycheck Protection Program by state as of May 1, 2020 are listed here.

 

Further information

Here are some helpful links for more information, which should be updated on a regular basis:

https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program/
https://www.irs.gov/coronavirus
https://www.irs.gov/newsroom/economic-impact-payments-what-you-need-to-know
https://www.drakesoftware.com/archive/economic-impact-payments-the-facts/