Internal Revenue ServiceFederal, State, & Local Governments

Louisiana Association of School Business Louisiana Association of School Business OfficialsOfficials

November 7, 2012November 7, 2012

HOW TO AVOID INFORMATION REPORTING

PROBLEMS FOR

GOVERNMENT ENTITIES

FSLG MISSION STATEMENT

Provide Government Entities top quality service by helping them understand and comply with their tax responsibilities and by applying the tax law with integrity and fairness to all.

TOPICS for Today

Purpose of Form 1099-MISCForm W-9Backup WithholdingPenaltiesIRS On-Line TIN Matching ProgramFiling Information Returns Electronically

(FIRE)

FORM 1099-MISC MISCELLANEOUS INCOME

What is a Form 1099-MISC?

Information return required to report certain types of payments* made to non-employees and others

*Payments made BY Federal, State and

Local government agencies are reportable

Types of Payments/Services Reported on the FORM 1099-

MISC ( By Box)

Rents – Box 1Other Income – Box 3Backup Withholding (BWH)– Box 4Medical/Health Care Payments – Box 6Nonemployee Compensation – Box 7

Attorney’s Fees - Box 7

Types of Payments/ServicesReported on 1099-MISC

(cont’d)

Gross Proceeds to Attorneys – Box 14

Related to Legal Services

Corporate Exemption Does NOT

APPLY

Who Does NOT Get a Form 1099-MISC?

Employees Corporations Except: Attorneys or Medical or Health Care Service Providers

Businesses that provide you with: Merchandise Inventory Equipment, supplies, parts only* *Parts provided with services are reportable

When are Forms1099-MISC Required to be

Filed?

When Payments for services = $600 or more in a calendar year

Furnish to Payee by January 31, xxxxTO IRS with 1096 transmittal:

File Paper by last day of February File Electronically by last day of March

Transmittal Form 1096

Use Form 1096 for each TYPE

of Information Return you file

Filer Information: Please put a contact

name and a Telephone Number!

Using Form W-9

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

LLCs AND

REPORTABLE PAYMENTS

May be a partnership or a corporationSecure a Form W-9 to determine its statusProviding legal, medical and/or health

services

BACKUP WITHHOLDING

Internal Revenue Code section 3406Required to withhold if

Payee failure to furnish valid TIN requires immediate withholding

Received a CP2100 or CP 2100A notice from the IRS

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 paymentsRate is 28% after May 28, 2003

CP2100/2100A NOTICE

FIRST “B” NOTICE

SECOND “B” NOTICE

NOTICE 972-CG

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

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

FORM 945

COMMON ERRORS

Failure to obtain correct identifying information

Failure to aggregate payments Assuming payee is a corporation

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

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

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

IRS ONLINE TIN MATCHING PROGRAM

Available to payers who file information returns subject to backup withholding

Free for registered usersQuick verification of Name/TIN

combinations

ELIGIBLE USERS

Payers or their authorized agentsAuthorized 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

ADVANTAGES OF USING TIN MATCHING

Fast and reliable verification FreeIndividual records can be printedSubmissions may meet reasonable cause

regarding penalty relief

REQUIREMENTS TO PARTICIPATE

Filed an information return in the past two yearsComply with all terms of Revenue Procedure

2003-9Transmit only name/TIN combinations for which

you will make paymentsTransmit only combinations you have not

previously requestedMaintain confidentiality of informationProvide IRS information necessary to monitor

program

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

RESPONSE CODES

0 – Match1 – Missing or incorrect TIN2 – TIN not currently issued3 – Does not match4 – Invalid request5 – Duplicate request6, 7, 8 – TIN type unknown, but matches SSN or

EIN records, or both

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.govSee 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 payersBenefits

Paperless Secure Easy to use Efficient Fast

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 daysDue date of filing is later than paper filing

for most returns

FIRE FILING REQUIREMENTS

Software required to file in proper formatSubmit Form 4419 Create your FIRE AccountList of Approved IRS e-file for Business

Providers available at www.irs.gov and Publication 1582

ELECTRONIC FILING REQUIREMENT

250 + applies to each type of formApplies separately to original & corrected

returnsComplete online Form 8809 to request an

extension for filing information returns via FIRE

Forms or Assistance

IRS website: www.irs.govFSLG website: www.irs.gov/govtsForms: 1-800-TAX-FORMAssistance: Contact your FSLG

Specialist

QUESTIONS??