Form 1099 MISC Explained
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Form 1099-MISC is one of the most common Information Reporting Forms that businesses, estates, trusts and non-profits are required to file at the end of the calendar year. It is also the Form 1099 that most commonly has errors identified by the IRS. So what can you do NOW to prepare a Form 1099-MISC next January and avoid notices of errors from the IRS? By developing best practices and exercising due diligence collecting data to be included on the Forms 1099-MISC.
- The most common mistakes are not the amounts in the boxes but the mis-match of the payee’s name and the payee’s Identification Number whether it be a Social Security Number, Employer’s Identification Number, or Taxpayer’s Identification Number.
- The second most common mistake is failure to prepare Form 1099-MISC for payment of services of $600 or more.
- Lastly, by confusing whether the amount goes in Block 3, Other Income, or Block 7, Nonemployee Compensation.
At the completion of this course you will have the tools necessary to evaluate the W9 and prepare a Form 1099-MISC with all the blocks properly completed.
- Review W-9 for Accuracy & Completeness
- Match W-9 SSN, EIN, TIN to IRS records
- Entities Who Should Send 1099 MISC
- Entities Who Should Receive a 1099-MISC
- Block by Block Instructions of 1099-MISC
Important Issues Covered:
- What name and EIN/SSN goes on the 1099-MISC?
- How do I know what amount goes in which block?
- Example: Block 3, Other Income, versus Block 7, Non-Employee Compensation
- Example: Block 7, Non-Employee Compensation Paid to Attorneys or Block, 14, Gross Proceeds Paid to an Attorney
- Example: Block 6, Medical and Health Care Payments
- You will be able to recognize how to report payments made to attorneys
- You will be able to define the purpose of Form 1099 MISC
- You will be able to identify the correct reporting for various types of payments
Format: Recorded Webcast
Field of Study: Taxes
Program Prerequisites: None
Advanced Preparation: None
This program was last update on August 15, 2017
Foundational Laws - 00:01:27
What’s New - 00:04:20
Validating Data - 00:24:15
Problem Payees - 00:36:07
The Exempt Organization - 00:41:40
Reporting - 00:44:01
The Basics - 00:44:-01
The Middleman - 00:44:50
Data - 00:47:55
Box 1 - 00:51:35
Box 2 - 00:56:35
Box 3 - 00:59:29
Box 4 - 01:10:00
Box 6 - 01:12:10
Box 7 - 01:17:05
Box 9 - 01:18:50
Box 14 - 01:19:12
Box 15 - 01:21:30
Q&A and Close - 01:26:02
Attorney Payments - 00:59:29, 01:17:05, 01:19:12
B-Notice - 00:22:40, 00:24:15
Backup Withhold - 00:25:07
C-Notice - 00:22:40
D-Notice - 00:22:40
De minimus - 00:04:20
Deferred Compensation - 01:21:30
Determination letter - 00:38:00
Disregarded Entity - 00:39:16
Exempt Payments - 00:27:15, 00:47:55, 00:51:16, 01:12:10
Extension Request - 00:04:20
FATCA - 00:47:55
Form 1042-S - 00:30:30, 01:20:09
Form 1098 - 00:47:55
Form 1099-DIV - 01:20:09
Form 1099-MISC Box 1 - 00:51:35
Form 1099-MISC Box 2 - 00:56:35
Form 1099-MISC Box 3 - 00:59:29
Form 1099-MISC Box 4 - 01:10:00
Form 1099-MISC Box 6 - 01:12:10
Form 1099-MISC Box 7 - 01:17:05
Form 1099-MISC Box 9 - 01:18:50
Form 1099-MISC Box 14 - 01:19:12
Form 1099-MISC Box 15 - 01:21:30
Form 5498 - 00:47:55
Form 8832 - 00:38:00
Fringe Benefits - 01:17:05
IRC Chapter 4 (FATCA) - 00:01:27
IRC Section 1441 - 00:01:27
IRC Section 3406(a) - 00:01:27, 00:25:20
IRC Section 409A - 01:18:20
IRC Section 6041(a) - 00:01:27, 01:19:12, 01:20:09
IRC Section 6045(f) - 01:19:12
IRC Section 6050W - 00:27:15
IRC Section 6051 - 01:19:12
IRC Section 6109(a)(2) - 00:01:27
ITIN - 00:32:57
LLC - 00:38:00, 00:39:16
New W-9 - 00:14:34
Non-Qualified Deferred Compensation - 01:21:30
Non US Payees - 00:32:57
P-Card Transactions - 00:51:16
Safe Harbor - 00:23:51
Select Check - 00:41:40
Surface Royalties - 00:51:16
US vs Non US Person - 00:30:30
W-9 Perjury Certification - 00:22:40
501(c)(3): A 501(c)(3) organization is a corporation, trust, unincorporated association, or other type of organization that is exempt from federal income tax under section 501(c)(3) of Title 26 of the United States Code. It is the most common type of the 29 types of 501(c) nonprofit organizations in the United States. (en.wikipedia.com)
B-Notice: A notice from the IRS stating that one or more tax ID numbers were missing from a 1099 or do not match the IRS records.
Backup Withholding: Backup withholding is the tax that is levied on investment income, at an established tax rate, as the investor withdraws it. Backup withholding helps to ensure that government tax-collecting agencies (such as the IRS or Canada Revenue Agency) will be able to receive income taxes owed to them from investors' earnings. (www.investopedia.com)
C-Notice: Backup withholding notice from the IRS stating that the non-employee has understated income and is subject to backup withholding.
De minimus: Too trivial or minor to merit consideration.
Deferred Compensation: Deferred compensation is an arrangement in which a portion of an employee's income is paid out at a later date after which the income was earned. Examples of deferred compensation include pensions, retirement plans, and employee stock options. (en.wikipedia.org)
Disregarded Entity: A disregarded entity refers to a business entity with one owner that is not recognized for tax purposes as an entity separate from its owner. A single-member LLC ( “SMLLC”), for example, is considered to be a disregarded entity. (www.pntax.com)
Expense Reimbursement: Expense reimbursement is a method for paying employees back when they spend their own money on business-related expenses. These expenses generally occur when an employee is traveling for business but can occur in other work-related situations. (www.thebalancecareers.com)
FATCA: FATCA was enacted in 2010 by Congress to target non-compliance by U.S. taxpayers using foreign accounts. FATCA requires foreign financial institutions (FFIs) to report to the IRS information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest. (www.treasury.gov)
Form 1098: A form filed with the Internal Revenue Service (IRS) that details the amount of interest and mortgage-related expenses paid on a mortgage during the tax year.
Form 1099 MISC: The Form 1099-MISC is an Internal Revenue Service (IRS) tax return document used to report miscellaneous payments made to nonemployee individuals, such as independent contractors, during the calendar year. (www.shrm.org)
Form 5498: Tax Form 5498 is used to report contributions on IRAs, which include traditional and Roth, as well as Savings Incentive Match Plan for Employees (SIMPLE) and Simplified Employee Pension (SEP). Many people are under the impression that they need Tax Form 5498 in order to file their final return. (www.irs.gov)
Fringe Benefits: An extra benefit supplementing an employee's salary, for example, a company car, subsidized meals, health insurance, etc.
Intangible Property: Intangible property, also known as incorporeal property, describes something which a person or corporation can have ownership of and can transfer ownership to another person or corporation, but has no physical substance, for example brand identity or knowledge/intellectual property. (en.wikipedia.org)
IRC Section 6041(a): Provides that persons engaged in trade or business must report certain payments on an information return.
IRC Section 6109(a)(2): Requires that a payee provide a TIN to the payer when the payment will be reportable on an information return.
IRC Section 3406(a): Requires that, under certain circumstances, including failure ot payee to provide a TIN, the payer must perform backup withholding.
IRC Section 1441: Requires that, under certain circumstances, payers must perform 30% back up withholding on US sourced payments made to non-resident aliens.
IRC Chapter 4 (FATCA): Creates a due diligence obligation for US Withholding Agents to verify payee identity when it involves virtually any cross-border payment.
Limited Liability Company (LLC): Can be a single member (much like a sole proprietor) or a multi member. It shares certain traits of both corporations as well as partnerships or sole proprietorships. It is not a corporation.
Nonqualified Deferred Compensation (NQDC): A nonqualified deferred compensation (NQDC) plan is an elective or non-elective plan, agreement, method, or arrangement between an employer and an employee (or service recipient and service provider) to pay the employee or independent contractor compensation in the future. (www.irs.gov)
Safe Harbor: A safe harbor is a provision of a statute or a regulation that specifies that certain conduct will be deemed not to violate a given rule. It is usually found in connection with a vaguer, overall standard. (en.wikipedia.org)
Surface Rights: Surface rights refer to those ownership rights in a parcel of real estate that are limited to the surface. It does not include air rights or subsurface rights. The following is an example of a case law on surface right: The term 'surface rights' has a definite and well-understood meaning. (definitions.uslegal.com)
Steven Mercatante is the principal and founder of TIR Consulting, LLC. He is a nationally recognized leader in tax reporting education and consulting on specialized compliance issues. He has conducted on-site consultation for corporate clients from across the world and led countless seminars and webinars for Convey Compliance Systems, IAPP, Balance Consulting, The Accounts Payable Network, Accounts Payable Now and Tomorrow, Progressive Business Conferences, The Center For Competitive Management,... View Full Profile
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