1099 Reporting of Settlements and Payments to Attorneys

1099 Reporting of Settlements and Payments to Attorneys

On Demand Webinar

Guest Speaker:   Steven Mercatante
Topic:   Taxation and Accounting
Credit:   ATATX 1.50, CPE 2.00, IRS 2.00
Average Rating: 0.0 / 5
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Webinar Details
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  • Webinar Length: 100 Minutes
  • Guest Speaker:   Steven Mercatante
  • Topic:   Taxation and Accounting
  • Credit:   ATATX 1.50, CPE 2.00, IRS 2.00
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The IRS is paying close attention to third-party payers, including small and mid-size businesses, and how they report payments made to subcontractors, attorneys, architects and other service providers on Form 1099-MISC. 

During this must-attend session our expert speaker will explore:

  • How to comply with IRS rules when reporting attorney fees and other third-party payments 
  • Documentation requirements and instructions for forms 1099-MISC 

Plus, you will learn what your organization needs to be doing now to be meet reporting deadlines and ensure compliance including:

  • How Form 1099-MISC reporting requirements have expanded 
  • How to report punitive legal damage awards and gross proceeds paid to attorneys
  • Handling of multiple 1099s
  • Which payments are taxable and reportable and which are considered exceptions
  • Handling 1099 reporting for settlement agreements
  • Whether attorney fees are reported in box one of the 1099-NEC or box ten of the 1099-MISC
  • Learn when an LLC is not reportable as a corporation and when it is as a company
  • Discover how to report multi-member LLC's with corporate owners 
  • Address reporting issues cropping up with incorporated legal service providers

Learning Objectives:

  • How to report punitive legal damage awards and gross proceeds paid to attorneys
  • Which payments are taxable and reportable and which are considered exceptions
  • Learn when an LLC is not reportable as a corporation and when it is as a company

Level: Intermediate
Format: Recorded webcast
Instructional Method: QAS Self Study
NASBA Field of Study: Taxes
Program Prerequisites: None
Advance Preparation: None

  1. Introduction
  2. The Law -Learn it, Know it, Live it 00:01:01
  3. 1099-NEC 00:11:42
  4. The Form 1099-NEC - Reportable Payments 00:14:50
  5. 1099-MISC 00:16:04
  6. The Form 1099-MISC and Claimant/Attorney Reporting 00:18:45
  7. The W-9 00:33:48
  8. Attorney and Settlement Payees Starting Point 00:37:59
  9. Attorney and Settlement Issues: Reporting - Form 1099-MISC 00:49:06
  10. Attorney and Settlement Issues: Reporting - Form 1099-MISC Box 3 00:59:26
  11. Attorney and Settlement Issues: Reporting - Watch Out For That Non-Fixed and Determinable Exception 01:09:00
  12. Form 1099-MISC and Attorney and Settlement Reporting - Punitive Damages and Back Pay 01:14:48
  13. Attorney and Settlement Reporting - Reporting Obligations 01:24:56
  14. Attorney and Settlement Reporting - Special Rules on Delivery 01:28:16
  15. Attorney and Settlement Reporting  - One Final Example 01:31:23
  16. Attorney and Settlement Reporting  - Form 1099-MISC Box 10 01:34:37
  17. Attorney and Settlement Reporting  - Form 1099-MISC Box 10 Exceptions 01:35:26
  18. Protect Yourself 01:38:02
  19. Attendee Questions 01:39:08
  20. Presentation Closing 01:41:47
  • Steven Mercatante

ATATX Credit

Aurora Training Advantage is offering continuing education points designed to recognize dedication to training and excellence in accounting.

CPE Credit

Continuing Professional Education

Aurora Training Advantage is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.nasbaregistry.org.

For more information regarding administrative policies such as complaint and refund, and cancellation please contact our offices at 407-542-4317 or training@auroratrainingadvantage.com.

You must answer all questions during the webinar, view the recording completely and pass the test at the end with 70% correct answers to receive CPE credit.

IRS Credit

Preparer Tax Identification Number


  • Audit 00:07:45, 00:09:29, 00:43:06
  • Backup Withholding 00:05:34, 01:04:52, 01:26:52
  • Compensatory Damages 00:23:16, 01:07:49
  • Contract 01:35:06
  • CP-2100 00:17:22
  • DBA -Doing Business As 00:33:48
  • Disregarded Entity 00:36:45, 00:50:16
  • Due Diligence 00:04:38, 00:39:40
  • Exempt 00:19:37, 00:26:34, 00:38:15
  • Expense 00:47:30
  • FATCA 00:16:04
  • Federal Insurance Contributions Act (FICA) 01:21:35
  • Federal Unemployment Tax Act (FUTA) 01:21:454
  • Form 1099 00:28:14, 00:33:17, 01:04:04, 01:18:55
  • Form 1099-MISC 00:11:42, 00:14:37, 00:19:03, 00:28:32, 00:32:28, 01:00:47,01:24:30
  • Form 1099-NEC 00:11:46, 00:15:01, 00:18:59, 01:25:15
  • Form 8832 00:49:35
  • Form W-2 01:02:10, 01:21:26, 01:24:27
  • Form W-9 00:33:48, 00:37:49, 00:50:06
  • Garnishments 00:22:29, 00:52:10
  • Gross Proceeds Payment 00:05:00, 00:19:43
  • Involuntary Termination 01:24:43
  • IRC Section 3406(a) 00:01:01
  • IRC Section 6041(a) 00:01:01, 00:58:17
  • IRC Section 6045 00:04:56, 00:20:54, 00:52:18, 00:58:19, 01:35:42
  • IRC Section 6109(a)(2) 00:01:01
  • IRS Notice 972CG 00:17:25
  • Levy 00:51:58
  • Limited Liability Company (LLC) 00:40:40, 00:49:13
  • Punitive Damages 00:23:21, 00:44:30, 01:14:51
  • Severance Pay 01:24:38
  • Sole Proprietor 00:37:32, 00:40:30
  • Tax Gap 00:01:52, 00:04:15
  • TIN 00:17:22, 00:34:47, 00:40:51, 01:04:40
  • Transaction 00:22:12, 01:04:32, 01:28:30, 01:35:54
  • Wage 01:21:51

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)

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.

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.

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.

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.

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-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 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 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/)

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.

IRS Notice 972CG: The IRS started mailing 972CG penalty notices in July 2013 regarding 1099's with missing or incorrect TIN/Name Combinations. A 972CG is a NOTICE OF PROPOSED CIVIL PENALTY. A simple way to prevent this costly penalty is to verify that your information is correct prior to filing.

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/)

Involuntary Termination: An involuntary termination, for purposes of Section 409A, means a severance of the employment relationship due to the employer's independent exercise of the unilateral authority where the employee was willing and able to continue performing services.

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.

Severance Pay: An amount paid to an employee upon dismissal or discharge from employment. Severance pay is usually given by an employer to its employees who are laid off or terminated for reasons other than firing-for-cause. ... In general, severance pay is up to the employer's discretion and is only legally required under specific circumstances.

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.

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.


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