Internal Revenue Service

Federal, State, & Local Governments

HOW TO AVOID INFORMATION REPORTING PROBLEMS FOR GOVERNMENT ENTITIES

Louisiana Association of School Business Officials November 7, 2012

FSLG MISSION STATEMENT

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Provide Government Entities top quality service by helping them understand and comply with their tax responsibilities and by applying the tax law with integrity and fairness to all.

TOPICS for Today

      Purpose of Form 1099-MISC Form W-9 Backup Withholding Penalties IRS On-Line TIN Matching Program Filing Information Returns Electronically (FIRE)

FORM 1099-MISC MISCELLANEOUS INCOME

What is a Form 1099 MISC?

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Information return required to report certain types of payments* made to non employees and others

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Payments made BY Federal, State and Local government agencies are reportable

Types of Payments/Services Reported on the FORM 1099 MISC ( By Box)

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Rents – Box 1 Other Income – Box 3 Backup Withholding (BWH)– Box 4 Medical/Health Care Payments – Box 6 Nonemployee Compensation – Box 7

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Attorney’s Fees - Box 7

Types of Payments/Services Reported on 1099-MISC (cont’d)

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Gross Proceeds to Attorneys – Box 14 Related to Legal Services Corporate Exemption Does NOT APPLY

Who Does NOT Get a Form 1099-MISC?

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Employees Corporations Except: Attorneys or Medical or Health Care Service Providers

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Businesses that provide you with:

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Merchandise Inventory

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Equipment, supplies, parts only* *Parts provided with services are reportable

When are Forms1099 MISC Required to be Filed?

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When Payments for services = $600 or more in a calendar year Furnish to Payee by January 31, xxxx TO IRS with 1096 transmittal:

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File Paper by last day of February

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File Electronically by last day of March

Transmittal Form 1096

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Use Form 1096 for each TYPE of Information Return you file

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Filer Information: Please put a contact name and a Telephone Number!

Using Form W-9

Purpose of Form W-9

 Provide to every vendor who performs services for your entity  Used to obtain an identifying number of a vendor  Identifies type of business operation - i.e. Sole Proprietor, LLC, Corporation, Partnership

LLCs AND REPORTABLE PAYMENTS

   May be a partnership or a corporation Secure a Form W-9 to determine its status Providing legal, medical and/or health services

BACKUP WITHHOLDING

  Internal Revenue Code section 3406 Required to withhold if  Payee failure to furnish valid TIN requires immediate withholding  Received a CP2100 or CP 2100A notice from the IRS

WHEN TO BEGIN BACKUP WITHHOLDING

 Aggregate payments for the calendar year equal or exceed $600  Immediately if in the preceding year you were required to -- issue a related information return, or -- impose backup withholding on such payments  Rate is 28% after May 28, 2003

CP2100/2100A NOTICE

FIRST “B” NOTICE

SECOND “B” NOTICE

NOTICE 972-CG

WHEN TO STOP BACKUP WITHHOLDING

 Failure to Furnish TIN - stop within 30 calendar days of payee furnishing correct TIN  Notice from IRS (incorrect TIN) - stop withholding within 30 calendar days after you receive a certified Form W-9

REPORTING BACKUP WITHHOLDING

 Report withholding to payee and to IRS in Box 4 of Form 1099-MISC  Reporting required even if the amount of the payment is below the normal threshold for filing Form 1099  Send copy A of all paper Forms 1099 to the IRS with Form 1096  Total withheld reported on Form 945

FORM 945

COMMON ERRORS

   Failure to obtain correct identifying information Failure to aggregate payments Assuming payee is a corporation

FAILURE TO FILE PENALTIES

 Correctly file within 30 days after the due date – $30 per return with $250,000 cap  On or before August 1 – $60 per return with $500,000 cap  No return filed or correctly file after August 1 – $100 per return with $1.5 million cap

FAILURE TO FURNISH PAYEE STATEMENTS

 $100 per statement, no matter when the correct statement is furnished  May be reduced for failures corrected: -- Within 30 days after the due date: $30 per return - On or before August 1: $60 per return

ABATEMENT OF PENALTIES

  Must be for reasonable cause; cannot be due to willful neglect May make the request after penalty is assessed  Reasonable Causes -- Significant mitigating factors -- Failure was due to events beyond filer’s control

IRS ONLINE TIN MATCHING PROGRAM

   Available to payers who file information returns subject to backup withholding Free for registered users Quick verification of Name/TIN combinations

ELIGIBLE USERS

     Payers or their authorized agents Authorized Agent - employee or external vendor contracted to transmit information on behalf of the governmental entity Authorized agent not required – you can register and use it yourself Individual must be approved by the principal and registered Service not to be used for any other purpose

ADVANTAGES OF USING TIN MATCHING

    Fast and reliable verification Free Individual records can be printed Submissions may meet reasonable cause regarding penalty relief

REQUIREMENTS TO PARTICIPATE

      Filed an information return in the past two years Comply with all terms of Revenue Procedure 2003-9 Transmit only name/TIN combinations for which you will make payments Transmit only combinations you have not previously requested Maintain confidentiality of information Provide IRS information necessary to monitor program

METHODS TO SUBMIT REQUESTS

 Interactive    Submit up to 25 name/TIN combinations on-line Up to 999 combinations per day Response in real time (normally about five seconds)  Bulk   Submit a text file with up to 100,000 name/number combinations per submission Receive a response to a secure mailbox within 24 hours

RESPONSE CODES

       0 – Match 1 – Missing or incorrect TIN 2 – TIN not currently issued 3 – Does not match 4 – Invalid request 5 – Duplicate request 6, 7, 8 – TIN type unknown, but matches SSN or EIN records, or both

REGISTRATION

     “Principal” for the organization must initiate registration Each designated user receives a token at home address – must validate within 28 days of initial registration When all users are confirmed, principal completes registration To register: search for

e-services

on IRS.gov

See Publication 2108A or call 1-866-255-0654 (01-512-416-7750 for international callers)

FIRE SYSTEM

    Filing Information Returns Electronically (FIRE) Available to all filers; use required for larger volume payers Benefits    Paperless Secure Easy to use   Efficient Fast Flexible

WHO CAN USE THE FIRE SYSTEM?

   Available to all filers of Information Returns  REQUIRED where filing 250 or more Information Returns Status of filing available within 2 days Due date of filing is later than paper filing for most returns

FIRE FILING REQUIREMENTS

    Software required to file in proper format Submit Form 4419 Create your FIRE Account List of Approved IRS e-file for Business Providers available at www.irs.gov and Publication 1582

ELECTRONIC FILING REQUIREMENT

  250 + applies to each type of form Applies separately to original & corrected returns  Complete online Form 8809 to request an extension for filing information returns via FIRE

Forms or Assistance

 IRS website: www.irs.gov

 FSLG website: www.irs.gov/govts  Forms: 1-800-TAX-FORM  Assistance: Contact your FSLG Specialist

QUESTIONS??