1099 Reporting of Settlements and Payments to Attorneys
Please see below for additional instructions and information regarding this program.
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 reportable in box 7 or 14
- 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
Today’s Regulatory Climate 00:03:48
What’s New - Form 1099-NEC 00:10:34
The W-9 00:21:22
When is Form W-9 Perjury Certification Required? 00:29:50
Why Use a W-9 to Solicit TIN for 1099 Reporting? 00:30:54
When to Get an Updated Form W-9 00:31:48
Attorney Payee Refuses to Provide a TIN 00:34:18
Payments Reportable on Forms 1099 00:39:52
Identifying Your Payee: How to Know Who’s Who 00:41:29
Attorney and Settlement Payees Starting Point 00:42:40
The LLC 00:48:46
The LLC as the Disregarded Entity 00:51:16
The Middleman 00:53:28
The Form 1099-MISC 00:58:19
Form 1099-MISC Box 3 01:01:48
Watch Out For That Non-Fixed and Determinable Exception 01:11:27
Punitive Damages and Back Pay 01:14:48
Attorney and Settlement Reporting 00:21:06
Special Rules 01:23:45
Form 1099-MISC Box 4 Backup Withholding 01:27:47
Form 1099-MISC Box 6 01:28:13
Form 1099-MISC Box 6 (cont.) 01:29:07
Form 1099-MISC Box 14 01:31:40
Form 1099-MISC Box 14 (cont.) 01:31:55
Protect Yourself 01:32:07
Attendee Questions 01:32:53
Presentation Closing 01:40:42
- Backup Withholding 00:31:34
- B-Notice 00:06:25, 00:30:00, 01:27:15
- C Notice 00:06:25
- Disregarded Entity 00:23:59, 00:51:16
- D Notice 00:06:25
- FATCA 00:27:34
- Form 1042-S 00:42:14
- Form 1099 MISC 00:11:27, 00:58:19
- Form 1099-NEC 00:10:54
- Form 8832 00:49:25
- Form W-9 00:21:23
- Garnishment 00:53:43
- IRC Section 3406(a) 00:03:48, 00:39:00
- IRC Section 6041(a) 00:03:48, 00:36,:56
- IRC Section 6109(a)(2) 00:03:48, 00:35:09
- Levy 00:53:43
- Limited liability company (LLC) 00:48:49
- PATH Act 00:12:29
- Tax Gap 00:
- TIN 00:21:47, 00:34:27
- Form W-2 01:20:57
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)
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.
C-Notice: Backup withholding notice from the IRS stating that the non-employee has understated income and is subject to backup withholding.
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.
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)
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.
Form 1042-S: Form 1042, also "Annual Withholding Tax Return for U.S. Source Income of Foreign Persons", is used to report tax withheld on certain income of foreign persons.
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)
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-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
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 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.
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.
PATH Act: The Protecting Americans from Tax Hikes (PATH) Act was created to protect taxpayers and their families against fraud and permanently extend many expiring tax laws. The law, which was enacted in December of 2015, affects the timing of certain refunds filed before February 15, 2017.
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.
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.
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/)
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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