We wanted to take an opportunity to remind all our business owners that the 2011 Form 1099s are due to be filed in the coming weeks. Here’s a quick update.
 
In 2010, a law was passed that would have required companies and many individuals to issue 1099s to practically all vendors. Due to public outcry that law was repealed. However, beginning with the 2011 tax returns, the IRS has added some new disclosure requirements.
 
The following questions have been added to all business returns, including Schedule C, Schedule F and Schedule E on individual returns (1040), as well as corporation (1120) and partnership (1065) returns.
 
. “ Did you make any payments in 2011 that would require you to file Form(s) 1099?”
•  “If “YES,” did you or will you file all required Forms 1099?”
 
Generally, if you are operating a business and you pay anyone other than a Corporation $600 or more during the year for services provided (including parts and materials), you are required to issue a 1099 to that entity (Person or Business “Service Provider”) by January 31, 2012.
 
The penalty for not filing a required 1099 with the IRS is $100 per 1099.  There is also a $100 penalty for each 1099 not provided to the recipient Service Provider.  If it is determined that a taxpayer willfully neglected to file 1099s, the penalty is $250 per 1099 not filed with the IRS and another $250 per 1099 penalty for not providing a copy to recipients.
 
Given that this is an area of greatly increased IRS scrutiny this year, we recommend that all business owners review your vendors’ payments for 2011, and determine who may or should receive a 1099.  Verify that you have the entity’s proper name, address and federal ID number.
 
You are welcome to contact our office if you have any questions or would like our help with Form 1099s. They are due to be filed by January 31, 2012.   

Let us know if you have any questions. 

Hopefully, you followed some of the suggestions we outlined a couple of years ago in TTW #21 to organize your records.  If you did, great!  This will make filing your tax returns a lot easier this year.  It also means that you, and your tax advisor, can spend more time on tax and financial planning issues for 2012 vs. looking back to 2011.

If you are new to our Tax Tip of the Week series, or didn’t follow our suggestions last year, now would be a good time to review TTW #21.   You might want to make getting organized your 2012 New Year’s Resolution!

This week we will look at some of the more common forms that you should be watching for in the coming weeks and months:

W-2:   Employers should mail these by 1/31/12.

If you have moved during the year, make sure former employers are aware of your new address.

W-2G: Casinos, Lottery Commissions and other gambling entities should mail these by 1/31/12 if you have gambling winnings above a certain threshold.

Note:  Some casinos will issue you a W-2G at the time you win a jackpot.  Make sure you have saved those throughout the year.

1099-INT: Banks, Credit Unions, Brokerage Firms, etc. will issue these by 1/31/12 to show the amount of interest income you earned on your savings/investments.

1099-DIV: Brokerage Firms, Mutual Funds, etc. have until 2/14/12 to issue these forms to show the dividend income you earned for the year.

1099-B: Brokerage Firms, Mutual Funds, etc. have until 2/14/12 to show the proceeds from the sale of stocks and mutual funds.  Most brokerage firms have gotten better at showing the cost basis on the sale of these investments.  If the statements do not show the basis, then you have some homework to do before filing your tax return.

Note:  Most of the larger brokerage firms issue “Consolidated Statements” that have the 1099-INT, 1099-DIV and 1099-B earnings reported on the same report.

K-1s: If you are a partner or shareholder in a business or a limited partner in some investments, your income and expenses will be reported to you on a K-1.  The tax returns for these entities are not due until 4/15/12 (if they have a calendar-year accounting).  Sometimes, you may not receive a K-1 until shortly after the entities’ tax return is filed in April.  S-Corps are due 3/15 unless extended until 9/15.

If you are a beneficiary of an estate or trust, your share of the income and expenses for the year will also be reported on a K-1.  The timing of when you may receive your K-1 is the same as outlined above.

NOTE:  Many times partnerships, estates and trusts will put their tax returns on extension.  If they do, the due date of the return is not until 9/15/12.  We often see client’s receiving K-1s in the third week of September.

If you receive, or expect to receive, a K-1 it may be best if you place your personal return on extension.  It is a lot easier to extend your return than it is to amend your return after receiving a K-1 late in the year.

So start watching your mailbox and put all of these statements you receive in that new file you created!