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1099s: W-2s’ poor relation, but just as demanding

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in Office Management,Payroll Management

Many Payroll departments get hit with the double whammy of having to prepare Forms 1099-MISC for the company’s independent contractors, in addition to employees’ W-2s. Reminder: If you file 250 or more 1099-MISC forms you must file them electronically through the IRS’ FIRE system.

If this is the first year you’ll be filing electronically, you must file Form 4419 at least 45 days before the due date of the returns to allow the IRS to process and respond to applications. That doesn’t leave you much time.

Who gets 1099-MISC forms? Independent contractors who don’t do business as corporations, and who have been paid at least $600 in cash this year, must receive their 1099-MISC forms by Jan. 31, 2014. TIN check for cash payees: If contractors didn’t provide you with their Taxpayer Identification Numbers (TINs) before they were paid, you should have been backup withholding on their payments. Report backup withholding to the IRS on Form 945 by Jan. 31, 2014.

TIN matching. TIN matching allows registered payers to quickly verify that a contractor’s name/TIN match before completing 1099-MISC forms. You may verify up to 25 name/TIN combinations on-screen. More information on TIN matching is available at the IRS' website.

TIN truncation. Proposed regulations, on which you may rely for this filing season, implement on a permanent and voluntary basis the IRS’ pilot project that allows 1099 filers to truncate the first five digits of a payee’s TIN. These TTINs, as they’re now called, look like this: XXX-XX-1234 or ***-**-1234. TTINs can’t be included on the IRS’ copies, but, in a departure from the pilot program, you may, in addition to using them on payees’ paper copies, use them on electronic copies, if payees have consented to electronic delivery.

Year-end to-do list. Form 1099-MISC may be provided to recipients electronically, if they consent. Don’t overlook these potential recipients:

  • Outside accountants, lawyers and salespeople
  • Auto mechanics/service stations that repair company cars
  • Plumbers, electricians, painters, carpenters, tech consultants or office cleaners
  • Equipment lessors and repairpeople
  • Office/company car lessors.

• INK ON INC: The words “Corporation,” “Corp.,” “Incorporated,” or “Inc.” on service pro­­viders’ letterheads, business cards or invoices mean they’re corporations, so no 1099-MISC reporting is necessary. Hitch: If “Company” or “LLC” is used, you’re not off the 1099 hook. You must also provide forms to sole proprietorships, partnerships and attorneys who do business as corporations.

Bottom line: You can’t go wrong sending out more 1099s than are required, but you set yourself up for penalties by sending out fewer.

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