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It’s almost tax time! Tips to Streamline Your Year-End Processes.
It’s December already and we wanted to provide some helpful reminders in order to help you streamline your year-end and tax return processes for 2011.
S-Corp Owners Health Insurance Reportable on W-2 – From the IRS: “Heath and accident insurance premiums paid on behalf of the greater than two percent S corporation shareholder-employee are deductible and reportable by the S corporation as wages for income tax withholding purposes on the shareholder-employee’s Form W-2. These benefits are not subject to Social Security or Medicare (FICA) or Unemployment (FUTA) taxes. The additional compensation is included in Box 1 (Wages) of the Form W-2, Wage and Tax Statement, issued to the shareholder-employee, but would not be included in Boxes 3 and 5 of Form W-2.”
For more information, including information about sole shareholder/employee situations, please see: http://www.irs.gov/businesses/small/article/0,,id=203100,00.html
NC County Business Property Tax Listings – “Any individual(s) or business(es) owning or possessing personal property used or connected with a business or other income producing purpose must file a county business property listing by January 31, 2012 unless an extension is filed.” For more information on registering for an account and to obtain forms for filing, please visit the following county Triangle, NC County websites as they apply to you.
Wake County – http://www.wakegov.com/tax/forms.htm
Durham County – http://www.co.durham.nc.us/departments/txad/Business_Personal_Property_Taxation.html
Orange County – http://www.co.orange.nc.us/assessor/BusinessPersonalProperty.asp
NC Employment Security Commission Notices – NC ESC will be sending out notices through the end of the year to address any changes in your unemployment insurance rate for 2012. Be sure to provide these to your payroll service provider to update their systems.
1099 Forms Due 01/31/12 – If you have paid or will pay subcontracted vendors more than $600 in non-employee compensation in tax year 2011, you will need to have a W-9 form on file for each of them in order to issue their 1099 form. The W-9 form will allow you to obtain the information needed to determine 1099 eligibility, their taxpayer ID number, and a current address for mailing. The deadline to submit 1099 forms to the taxpayer is January 31st and the deadline to submit to the IRS their copy is February 28th. Failure to file on time can result in penalties.
The W-9 form can be downloaded here: http://www.irs.gov/pub/irs-pdf/fw9.pdf.
Please also see the following IRS Publication http://www.irs.gov/pub/irs-pdf/i1099msc.pdf.
IRS Virtual Tax Workshop – If you would to obtain more information about your tax requirements, the IRS offers a free virtual workshop for small business owners and self-employed individuals at http://www.irsvideos.gov/virtualworkshop/
1099-Misc Forms Explained
1099-Misc is a type of information return required by the IRS for income reporting purposes to track payments made to independent contractors. These are usually people who provide services to your business such as accounting, general construction contractors, service technicians, attorneys, landlords, etc. who are NOT employees of your business. These payments may also include mileage reimbursements and materials provided.
According the IRS:
What is nonemployee compensation? If the following four conditions are met, you must generally report a payment as nonemployee compensation.
- You made the payment to someone who is not your employee;
- You made the payment for services in the course of your trade or business (including government agencies and nonprofit organizations);
- You made the payment to an individual, partnership, estate, or, in some cases, a corporation; and
- You made payments to the payee of at least $600 during the year.
The biggest challenge is making sure you know how to properly classify independent contractors and employees. This will help avoid penalties for not withholding income tax from these payments if they are deemed to have been employees.
In order to determine tax payer status, ID information, and 1099 eligibility, you must obtain a FORM W-9 from each of your subcontract vendors. It is a good policy to adopt that you do not issue payments to new vendors until you have their W-9 form on file. That way, you will not be scrambling at year-end to get information such as their tax ID and address in order to process their 1099 forms or to know if they are exempt as a corporation. 1099 Forms are due to each recipient by January 31st and to the IRS (form 1096) by February 28th.
New Changes to the 1099-Misc Rules :
Few people are aware of new changes to the 1099 Rules that were passed with the Healthcare Reform Bill. Under the old rule, non-employee compensation for services that totaled more than $600 per year required having a 1099 form issued. Also, under the old rule Corporations were exempt so you wouldn’t have to issue a 1099 to PCs-R-Us, INC. if they fixed your computer, for example.
The new rule states that beginning in 2012 payments that total $600 or more (at once or cumulative) made to ANYONE for ANYTHING, including corporations for services AND GOODS must be issued a 1099-misc form. You read that right! If you are a business, and you purchase more than $600 worth of supplies at Staples or Walmart, you will be required to issue them a 1099 form at year end. There are currently attempts at repealing this provision which have so far, (as of this writing) have been unsuccessful.
The IRS has also created a new 1099-K form requirement which is already in effect for 2011.
There are actually many various 1099 forms for different types of payments and you should always consult with a qualified accountant or tax professional for specific help in this area for your business. Feel free to contact us for more information.
New 1099-K Form Requirements start in 2011
Starting in 2011, if your business processes credit cards as a form of payment, your credit card processor must issue you a form 1099-K for the gross amount received if you processed more than 200 payments AND for more than $20,000. This is also true for all online retailers including Ebay and Amazon sellers who use PayPal to process their transactions.
If you feel this affects you, please get advice from your trusted accountant or qualified tax professional.
IRS Article: http://www.irs.gov/govt/fslg/article/0,,id=226894,00.html