Form 1099 Due Diligence: Avoid Costly Mistakes

1. Introduction
2. It All Starts With The Law 00:01:14
3. 1099-NEC 00:03:40
4. 1099-MISC 00:06:31
5. The Key to 1099 Due Diligence Is The W-9 00:08:44
6.  Name and TIN “Cheat Sheet” 00:21:28
7. Name and TIN “Cheat Sheet” Cont’d 00:22:37
8. W-9 Best Practices - When to Get an Updated Form W-9 00:23:18
9. W-9 Best Practices - Payee Refuses to Provide TIN 00:30:06
10. 1099 Data Validation Keys - Exempt Payments 00:33:22
11. 1099 Data Validation Keys - Identifying Your Payee 00:35:23
12. 1099 Data Validation Keys - U.S. Persons 00:36:24
13. 1099 Data Validation Keys - W-9 Red Flags for Non-U.S. Payees 00:37:50
14. Validating Data – Problem Payees - U.S. Corporations 00:42:06
15. Validating Data - Problem Payees - The LLC 00:43:47
16. Validating Data - Problem Payees - The LLC as the Disregarded Entity 00:45:55
17. Accountable Plans and Expense Reimbursements 00:46:49
18. Validating Data –The Exempt Organization 00:49:46
19. Validating Payee Data – TIN Match Program 00:53:13
20. Validating Payee Data –TIN Match Program - Using The Tool 00:55:14
21. Validating Payee Data –TIN Match Program - Delegated Authority 00:56:59
22. Watch Out For The Middleman 00:58:59
23. Backup Withholding Tips 01:01:09
24. Backup Withholding Tips -  Four Triggers 01:03:48
25. Backup Withholding Tips - B-Notices 01:06:10
26. Fringe Benefits Overview 01:07:28
27. Addressing 1099 Mistakes - Form 1099 Corrections 01:11:41
28. Addressing 1099 Mistakes - Payer Mistakes 01:15:51
29. Addressing 1099 Mistakes - Corrections 01:16:29
30. B-Notice Response Best Practices 01:19:24
31. B-Notice Response Best Practices Cont’d 01:23:56
32. B-Notice Response Best Practices - 1st Notice 01:26:20
33. B-Notice Response Best Practices - 2nd Notice 01:28:16
34. B-Notice Response Best Practices - Due Diligence 01:30:57
35. Protect Yourself 01:33:05
36. Attendee Questions 01:34:31
37. Presentation Closing 01:39:48

• Accountable Plan 00:47:03, 00:48:50
• Audit 00:17:17, 00:25:13
• Backup Withholding 00:02:07, 00:05:13, 00:24:04, 00:30:48, 00:46:40, 01:01:10, 01:17:28, 01:20:09, 01:27:39
• B-Notice 01:03:01, 01:19:26,01:26:20, 01:31:14
• CP-2100 01:22:49, 01:26:02
• DBA -Doing Business As 00:45:55, 01:24:36
• Disregarded Entity 00:10:22, 00:19:06
• Due Diligence 00:00:07, 00:01:49, 00:03:05, 00:09:05, 00:14:09, 00:24:52, 00:51:37, 00:56:59, 01:02:09, 01:06:16, 01:30:54
• EIN 00:22:16, 00:26:40, 00:45:13, 01:24:24
• Exempt 00:31:04, 00:44:19, 00:49:51
• Expense 00:48:11, 01:11:22
• Expense Reimbursement 00:46:56, 00:48:46
• FATCA 00:16:04
• FIRE - File Information Returns Electronically 01:15:05
• Form 1042-S 00:13:43, 00:37:47
• Form 1099-B 00:53:13
• Form 1099-DIV 00:53:13:
• Form 1099-INT 00:53:13
• Form 1099-K 00:33:42
• Form 1099-MISC 00:03:58, 00:06:31, 00:33:35, 00:53:13, 01:02:58
• Form 1099-NEC 00:03:57, 00:04:28, 00:33:34, 00:53:13, 01:02:56
• Form 1099-OID 00:53:13
• Form 1099-PATR 00:53:13
• Form 8832 00:44:36
• Form 990 00:50:26
• Form W-8 00:37:46
• Form W-9 00:08:47, 00:14:00, 00:16:43, 00:17:37, 00:23:30, 00:24:32, 00:25:54, 00:38:40, 01:15:45, 01:26:44
• Fringe Benefits 01:07:32
• Garnishment 01:00:00
• Golden Parachute Payments 00:06:31
• Information Returns Intake System (IRIS) 01:14:54
• IRC 6050W 00:33:41
• IRC Section 3406(a) 00:02:06, 00:30:45, 01:19:28
• IRC Section 6041(a) 00:01:54
• IRC Section 6045 01:00:09
• IRC Section 6109(a)(2) 00:01:58, 00:08:56, 00:30:16
• IRC Section 6721 00:30:32
• IRC Section 6724 00:25:04
• ITIN 00:38:23
• Levy 00:58:52
• Liability 00:49:03
• Limited Liability Company (LLC) 00:10:13, 00:16:56, 00:19:10, 00:43:48
• Reasonable Cause 00:25:08, 00:46:28, 01:07:16, 01:14:02
• Resident Alien 00:38:29
• Sole Proprietor 00:10:12, 00:19:12, 00:22:32, 00:26:38, 00:45:01, 01:24:34
• Supplier 00:34:34
• Tax Exempt Organization Search Tool 00:50:06
• Tax Gap 00:01:19
• TIN 00:09:03, 00:18:54, 00:21:30, 00:23:56, 00:24:41, 00:30:22, 00:38:15, 00:53:28, 01:01:28, 01:13:25, 01:22:20, 01:30:09
• TIN Match Program 00:53:19
• Vendors 00:02:19, 00:02:50, 00:08:09, 00:16:17, 00:17:49, 00:20:45, 00:23:46, 00:28:11, 00:55:12, 01:02:01

Accountable Plan: An accountable plan is a plan that follows the Internal Revenue Service (IRS) regulations for reimbursing workers for business expenses in which reimbursement is not counted as income. ... However, these expenses must be business-related to fall under an accountable plan.

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

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)

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.

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

Expense: Offset (an item of expenditure) as an expense against taxable income.

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). FACTA (Fair and Accurate Credit Transactions Act) is an amendment to FCRA (Fair Credit Reporting Act ) that was added, primarily, to protect consumers from identity theft. The Act stipulates requirements for information privacy, accuracy and disposal and limits the ways consumer information can be shared.

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.

Form 1042-S: Form 1042-S is used to report amounts paid to foreign persons (including persons presumed to be foreign) who are subject to income tax withholding. For an individual taxpayer, Form 1042-S is a document provided to you (and the IRS) by the payer of the income reported.

Form 1099-B: Proceeds From Broker and Barter Exchange Transactions is an Internal Revenue Service (IRS) tax form that is issued by brokers or barter exchanges. The form lists the gains or losses of all broker or barter exchange transactions.

Form 1099-DIV : Form 1099-DIV: Dividends and Distributions is an Internal Revenue Service (IRS) form sent to investors who receive distributions from any type of investment during a calendar year. Investors can receive multiple 1099-DIVs. Each Form 1099-DIV should be reported on an investor's tax filing.

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-K: A payment settlement entity (PSE) must file Form 1099-K for payments made in settlement of reportable payment transactions for each calendar year. A PSE makes a payment in settlement of a reportable payment transaction, that is, any payment card or third party network transaction, if the PSE submits the instruction to transfer funds to the account of the participating payee to settle the reportable payment transaction.

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 1099-OID: Form 1099-OID is a tax form intended to be submitted to the Internal Revenue Service by the holder of debt instruments which were discounted at purchase to report the taxable difference between the instruments' actual value and the discounted purchase price.

Form 1099-PATR: File Form 1099-PATR, Taxable Distributions Received From Cooperatives, for each person to whom the cooperative has paid at least $10 in patronage dividends and other distributions described in section 6044(b), or from whom you withheld any federal income tax under the backup withholding rules regardless of the amount of the payment.

Form 8832: Form 8832 is the Entity Classification Election form from the IRS. It is filed to elect a tax status other than the default status for your entity. For example, an LLC can elect to be taxed as a C Corporation.

Form 990 : Form 990 (officially, the "Return of Organization Exempt From Income Tax") is a United States Internal Revenue Service form that provides the public with financial information about a nonprofit organization. It is often the only source of such information.

Form W-8: Form W-8 is filled out by foreign entities (citizens and corporations) in order to claim exempt status from certain tax withholdings. The form is used to declare an entity's status as non-resident alien or foreign national who works outside of the United States.

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/)

Fringe Benefits: An extra benefit supplementing an employee's salary, for example, a company car, subsidized meals, health insurance, etc.

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

Golden Parachute Payments: Golden parachute payments are payments of compensation made to individuals whose companies experience a change in control

IRC 6050W : Section 6050W requires information returns to be made for each calendar year by merchant acquiring entities and third party settlement organizations with respect to payments made in settlement of payment card transactions and third party payment network transactions occurring in that calendar year.

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 6721: If an employer fails to file a correct Information, return by the due date, and cannot show reasonable cause, the employer may be subject to a penalty as provided under IRC Section 6721.

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.

ITIN : An Individual Taxpayer Identification Number is a United States tax processing number issued by the Internal Revenue Service. It is a nine-digit number that begins with the number 9, and the 4th and 5th digits, also known as second section, range from 70 to 88, 90 to 92 and 94 to 99.

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".

Liability: In financial accounting, a liability is defined as the future sacrifices of economic benefits that the entity is obliged to make to other entities as a result of past transactions or other past events, the settlement of which may result in the transfer or use of assets, provision of services or other yielding of economic benefits in the future.

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.

Real Property: Real property is land and any property attached directly to it, including any subset of land that has been improved through legal human actions. Examples of real properties can include buildings, ponds, canals, roads, and machinery, among other things

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.

Resident Alien : A resident alien is a foreign person who is a permanent resident of the country in which he or she resides but does not have citizenship. To fall under this classification in the United States, a person needs to either have a current green card or have had one in the previous calendar year.

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.

Supplier: A supplier is an entity that supplies goods and services to another organization. A supplier is usually a manufacturer or a distributor. A distributor buys goods from multiple manufacturers and sells them to its customers. Similar Terms. A supplier is also known as a vendor.

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.

TIN Match Program: TIN Matching is part of a suite of Internet-based pre-filing e-services that allows “authorized payers” the opportunity to match 1099 payee information against IRS records prior to filing information returns.

Tax Exempt Organization Search Tool: Tax Exempt Organization Search helps users find information about a tax-exempt organization’s federal tax status and filings.

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.

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.