1099 Reporting of Settlements and Payments to Attorneys

1. Introduction
2. What’s New 00:01:26
3. What’s New - E-Filing Changes 00:09:39
4. What’s New: Form 1099-NEC 00:20:34
5. 1099-NEC 00:23:04
6. The Form 1099-NEC - Reportable Payments 00:26:10
7. 1099-MISC 00:28:34
8. The Form 1099-MISC and Claimant/Attorney Reporting 00:32:05
9. The W-9 00:45:54
10. Attorney and Settlement Payees Starting Point 00:50:39
11. Attorney and Settlement Issues: Reporting - Form 1099-MISC 00:58:30
12. Attorney and Settlement Issues: Reporting - Form 1099-MISC Box 3 01:05:04
13. Attorney and Settlement Issues: Reporting - Watch Out For That Non-Fixed and Determinable Exception 01:11:17
14. Form 1099-MISC and Attorney and Settlement Reporting - Punitive Damages and Back Pay 01:15:53
15. Attorney and Settlement Reporting - Reporting Obligations 01:20:39
16. Attorney and Settlement Reporting - Special Rules on Delivery 01:23:01
17. Attorney and Settlement Reporting  - One Final Example 01:26:27
18. Attorney and Settlement Reporting  - Form 1099-MISC Box 10 01:29:28
19. Attorney and Settlement Reporting  - Form 1099-MISC Box 10 Exceptions 01:30:23
20. Protect Yourself 01:32:03
21. Attendee Questions 01:34:17
22. Presentation Closing 01:39:55

• 

  Steven Mercatante

  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 web [...]

  View Full Profile

• Accounts Payable (AP) 01:09:42
• Allocation 01:10:07, 01:16:05, 01:19:16
• Artificial Intelligence (AI)00:05:52
• Audit 00:04:16, 00:52:51
• Backup Withholding 00:22:43
• Bankruptcy 00:49:10
• Code section 61 01:07:45
• Compensatory Damages 00:36:30, 00:54:30, 00:56:44, 01:16:16
• Contract 00:36:34, 01:04:47, 01:17:02, 01:26:30
• DBA -Doing Business As 00:46:36
• Disregarded Entity 00:46:48
• Due Diligence 00:02:47
• EIN 00:49:19
• Exempt 00:29:05, 00:31:13
• Federal Insurance Contributions Act (FICA) 01:18:38
• Federal Unemployment Tax Act (FUTA) 01:18:38
• FIRE - File Information Returns Electronically 00:10:30, 00:16:49
• Form 1099 00:35:40, 00:42:51, 01:00:03
• Form 1099-INT 00:01:18, 00:29:50, 00:57:07, 01:17:11
• Form 1099-MISC 00:01:16, 00:21:48, 00:28:56, 00:32:26, 00:34:47, 01:05:16
• Form 1099-NEC 00:01:15, 00:21:44, 00:26:34, 00:32:23, 01:20:55
• Form 8809 00:19:04
• Form W-2 00:01:19, 00:03:03, 00:27:15, 00:59:53, 01:17:16, 01:20:36
• Form W-2-G 00:29:45
• Form W-9 00:52:39
• Garnishments 00:55:14
• Gross Proceeds Payment 00:08:29, 00:33:14, 01:13:57
• Information Returns Intake System (IRIS) 00:10:14, 00:16:52
• IRC Section 3406(a) 00:05:34, 01:29:44
• IRC Section 6041(a) 00:05:34, 00:29:35, 01:01:02
• IRC Section 6045 00:08:23, 01:01:16, 01:05:21, 01:21:09, 01:29:44
• IRC Section 6109(a)(2) 00:05:34, 00:50:59, 01:29:44
• IRC Section 6722 01:29:51
• IRC Section 6723 01:29:53
• IRC Section 6724 01:14:40 
• IRC Section 70433 00:29:24
• Levy 00:55:15
• Limited Liability Company (LLC) 00:46:44
• Punitive Damages 00:36:33, 00:54:31, 00:56:44 01:15:55
• Reasonable cause 01:14:35
• Sole Proprietor 00:46:42
• Tax Gap 00:04:20
• TIN 00:16:33, 00:47:39, 00:50:51
• Transaction 00:58:52
• Transmitter Control Code (TCC) 00:11:26
• Vendor 00:09:45, 00:17:51, 00:22:05, 00:31:02, 00:46:24
• Wages 01:18:53

Accounts Payable (AP): The amount of money a company owes creditors (suppliers, etc.) in return for goods and/or services they have delivered.

Allocation: Allocation is the separation of profits by percentage for each member.

Artificial Intelligence (AI): Artificial intelligence is intelligence demonstrated by machines, as opposed to the natural intelligence displayed by humans or animals.

Audit: A formal examination of an organization's or individual's accounts or financial situation

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)

Bankruptcy: is a legal proceeding in which a debtor declares their inability to pay back their creditors.

CP-2100: It is a notice that tells a payer that he or she may be responsible for backup withholding. It is accompanied by a listing of missing, incorrect, and/or not currently issued payee TINs. Largevolume filers will receive a CD or DVD data file CP2100, mid-size filers receive a paper CP2100, andsmall filers receive a paper CP2100A.

Code section 61: Section 61(a) of the Internal Revenue Code defines gross income as income from whatever source derived, including (but not limited to) “compensation for services, including fees, commissions, fringe benefits, and similar items.”

Compensatory Damages: A sum of money awarded in a civil action by a court to indemnify a person for the particular loss, detriment, or injury suffered as a result of the unlawful conduct of another. Compensatory damages provide a plaintiff with the monetary amount necessary to replace what was lost, and nothing more.

Contract: A written or spoken agreement, especially one concerning employment, sales, or tenancy, that is intended to be enforceable by law.

D-Notice: If you received an LT16 A/D notice, it's because he IRS is trying to collect unpaid taxes from you and/or their files show they're missing tax returns from you. It is essential that you take action in order to avoid potential enforcement action, which can include seizing your assets or wages. Enforcement action could also include the filing of a notice of federal tax lien, which could affect your credit score and ability to borrow.

DBA -Doing Business As: Sometimes it makes sense for a company to do business under a different name. To do this, the company has to file what's known as a DBA, meaning "doing business as." A DBA is also known as a "fictitious business name," "trade name," or "assumed name."

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)

Due Diligence: Due diligence is a process or effort to collect and analyze information before making a decision or conducting a transaction so a party is not held legally liable for any loss or damage. The term applies to many situations but most notably to business transactions.

EIN: The Employer Identification Number, also known as the Federal Employer Identification Number or the Federal Tax Identification Number, is a unique nine-digit number assigned by the Internal Revenue Service to business entities operating in the United States for the purposes of identification.

Exempt : Exempt employee is a term that refers to a category of employees set out in the Fair Labor Standards Act. They do not receive overtime pay, nor do they qualify for the minimum wage

FIRE - File Information Returns Electronically: The IRS FIRE system is the electronic network used to accept and process most types of filing forms. Technically, it stands for File Information Returns Electronically.

Federal Insurance Contributions Act (FICA): The Federal Insurance Contributions Act is a United States federal payroll contribution directed towards both employees and employers to fund Social Security and Medicare—federal programs that provide benefits for retirees, people with disabilities, and children of deceased workers.

Federal Unemployment Tax Act (FUTA): The Federal Unemployment Tax Act (FUTA) is a federal law that imposes an unemployment tax on employers. The FUTA tax funds the federal government's oversight of each state's unemployment program. Only employers pay FUTA tax. You must deposit the tax quarterly and file an annual form.

Form 1099: Form 1099 is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages, salaries, and tips (for which Form W-2 is used instead). - Wikipedia (https://en.wikipedia.org/)

Form 1099-INT: Form 1099-INT is the IRS tax form used to report interest income. The form is issued by all payers of interest income to investors at year end and includes a breakdown of all types of interest income and related expenses. Payers must issue Form 1099-INTs for any party to whom they paid at least $10 of interest during the 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 1099-NEC: In the context of 1099 tax filing, NEC stands for “Nonemployee Compensation” (the first letters of the three words None, Employee and Compensation). Most tax payers recognize NEC as box 7 on Form 1099-MISC. NEC is used to report income paid to independent-contractors / the-self-employed (referred to as 1099 employees for simplification purposes). So, while employers report income that gets paid to employees on Box 1 (Wages, tips, other compensation) of the W2 form, payers report income that gets paid to none-employees on Box 7 (NEC) of the 1099-MISC form. As an individual, if you received form 1099-MISC instead of Form W-2 then the payer did not consider you an employee and did not withhold income tax or social security and Medicare tax.

Form 8809: Use Form 8809 to request an initial or additional extension of time to file only the forms shown on line 6 for the current tax year.

Form W-2: Form W-2 is an Internal Revenue Service tax form used in the United States to report wages paid to employees and the taxes withheld from them. Employers must complete a Form W-2 for each employee to whom they pay a salary, wage, or other compensation as part of the employment relationship. - Wikipedia (https://en.wikipedia.org/)

Form W-9: Form W-9 (officially, the "Request for Taxpayer Identification Number and Certification") is used in the United States income tax system by a third party who must file an information return with the Internal Revenue Service (IRS). It requests the name, address, and taxpayer identification information of a taxpayer (in the form of a Social Security Number or Employer Identification Number). - Wikipedia (https://en.m.wikipedia.org/)

Form W2-G: File this form to report gambling winnings and any federal income tax withheld on those winnings. The requirements for reporting and withholding depend on: the type of gambling, the amount of the gambling winnings, and. generally the ratio of the winnings to the wager.

Garnishment: A legal summons or warning concerning the attachment of property to satisfy a debt

Gross Proceeds Payment: When a business sells an asset, whether tangible or intangible, it receives a payment, which is the gross proceeds. The amount includes the costs of production and other costs and expenses related to the transaction.

IRC Section 3406(a): Requires that, under certain circumstances, including the payee's failure to provide a TIN, the payer must perform backup withholding.

IRC Section 6041(a): Provides that persons engaged in trade or business must report certain payments on an information return.

IRC Section 6045: Every person doing business as a broker shall, when required by the Secretary, make a return, in accordance with such regulations as the Secretary may prescribe, showing the name and address of each customer, with such details regarding gross proceeds and such other information as the Secretary may by forms or regulations require with respect to such business.

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 6722: IRC Sec. 6722 authorizes a civil penalty for failing to provide payees with correct copies of statements furnished to the IRS.

IRC Section 6723: In the case of a failure by any person to comply with a specified information reporting requirement on or before the time prescribed therefor, such person shall pay a penalty of $50 for each such failure, but the total amount imposed on such person for all such failures during any calendar year shall not exceed $100,000.

IRC Section 6724: I.R.C. § 6724(a) Reasonable Cause Waiver — No penalty shall be imposed under this part with respect to any failure if it is shown that such failure is due to reasonable cause and not to willful neglect.

Independent Contractor: An independent contractor is a person or entity contracted to perform work or provide services to another entity as a non-employee. As a result, independent contractors must pay their own Social Security and Medicare taxes. - Investopedia (https://www.investopedia.com/)

Information Returns Intake System (IRIS): The Information Returns Intake System (IRIS) Taxpayer Portal is a system that provides a no cost online. method for taxpayers to electronically file Form 1099 series. The Taxpayer Portal allows you to enter. data to create Forms 1099 by either keying in the information or uploading a .csv file.

Levy: A tax levy, under United States Federal law, is an administrative action by the Internal Revenue Service under statutory authority, generally without going to court, to seize property to satisfy a tax liability. The levy "includes the power of distraint and seizure by any means".

Limited Liability Company (LLC): An LLC is a corporate structure where members cannot be held accountable for the company’s debts or liabilities. This can shield business owners from losing their entire life savings if, for example, someone were to sue the company. 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.

Punitive Damages: Punitive damages, or exemplary damages, are damages assessed in order to punish the defendant for outrageous conduct and/or to reform or deter the defendant and others from engaging in conduct similar to that which formed the basis of the lawsuit.

Reasonable Cause : Reasonable cause is based on all the facts and circumstances in your situation. The IRS will consider any reason which establishes that you used all ordinary business care and prudence to meet your federal tax obligations but were nevertheless unable to do so.

Sole Proprietor: A business that legally has no separate existence from its owner. The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. It simply refers to a person who owns the business and is personally responsible for its debts.

TIN: A Taxpayer Identification Number is an identifying number used for tax purposes in the United States and in other countries under the Common Reporting Standard. In the United States, it is also known as a Tax Identification Number or Federal Taxpayer Identification Number.

Tax Gap: The gross tax gap is the difference between true tax liability for a given tax year and the amount that is paid on time. It is comprised of the nonfiling gap, the underreporting gap, and the underpayment (or remittance) gap.

Transaction: In QuickBooks, a transaction type identifies what kind of transaction occurred, such as a customer transaction, bill payment or a bank transfer. When you submit a transaction, you type in a transaction code to represent it.

Transmitter Control Code (TCC): The Transmitter Control Code (TCC) is an identifier that the IRS uses to distinguish different electronic filing companies. It's necessary when you need to file for a correction. Getting a TCC depends on how you file your 1099 forms

Vendor: A vendor is a person or business that supplies goods or services to a company. Another term for the vendor is the supplier. In many situations, a company presents the vendor with a purchase order stating the goods or services needed, the price, delivery date, and other terms.

Wage: A fixed regular payment, typically paid on a daily or weekly basis, made by an employer to an employee, especially to a manual or unskilled worker.