Filing Reminder: Form 1099 and Form W-2

Adam Aucoin, Tax Manager
January 2014

The purpose of this article is to remind our readers that the deadlines for filing Form 1099, Form W-2, and related forms are looming.

The deadlines are:

January 31 – Send Forms W-2 and 1099 to individual recipients

February 28 – Send Forms W-3 and 1096 (and W-2s and 1099s) to IRS/SSA

W-2/W-3

Form W-2 is filed by an employer to report wages and tax withholdings of an employee (including household employees) to both the employee and the Social Security Administration. Form W-2 relates to an employer/employee relationship only and should not be issued to independent contractors (they should receive a Form 1099).

Copies of W-2s are also sent to the Social Security Administration. They are accompanied by a Form W-3, which serves as a summary sheet that totals the amounts reported on the individual forms W-2. Form W-2 can be found here and Form W-3 can be found here.

1099/1096

Form 1099 exists in a variety of forms and is filed by payers to report various types of payments to both the payment recipient and the IRS. Only payments made in the course of the payer’s trade or business are reportable on Form 1099. One of the most common forms in the 1099 series is Form 1099-MISC. 1099-MISC is used to report combined annual payments to a single recipient of $600 or more for rents, services (including parts and materials), prizes, awards, medical and health care payments, crop insurance proceeds, and other income. Payments made to incorporated entities do not require a Form 1099-MISC, other than incorporated law firms. It should be noted that payments for services made to Baker Newman Noyes, which is an LLC and not an incorporated entity, may trigger a 1099 filing requirement if the payment was for at least $600 and was made in a trade or business context.

Other select Forms in the 1099 series and their purposes include:

Form What the form reports
1099-INT Interest
1099-DIV Dividends
1099-C Cancellation of Debt
1099-R Distributions from Pensions, Annuities, Retirement Plans, IRAs, or Insurance Contracts

Copies of Forms 1099 are provided to the IRS in addition to the recipients. They are accompanied by Form 1096, which serves as a summary sheet for the 1099s. Form 1096 can be found here. The various forms in the 1099 series can be found here.

Penalties for late filing

Penalties for late filing of Forms 1099 and W-2 range from $30 to $100 per form for unintentional failures. The penalty can reach $250 per form if failure is deemed intentional. A couple years ago the IRS added two new questions to business income tax returns (Form 1120, 1120S, 1065 and Schedules C and E of Form 1040). They ask whether the business is required to file Forms 1099 and whether the forms were in fact filed. The presence of these questions will make it difficult for a payer to argue that uncorrected non-filing was unintentional, and likely will cause the highest penalty to apply.

Conclusion

Forms W-2 and 1099-MISC are among those known as “informational forms,” meaning information, rather than taxes, are being remitted with the filings. Late or no filing, though, can be costly due to penalties, and the IRS has indicated repeatedly that they plan to increase scrutiny in this area. We encourage anyone who made payments in the course of a trade or business during 2013 to ensure the appropriate filings are made. This article provides only an overview, and is not intended to provide all the rules and regulations related to filing these forms. Additional information for Forms 1099 may be found here and additional information for Forms W-2 may be found here.

Baker Newman Noyes has an experienced team that would be happy to prepare these forms for you. These services are also often offered by payroll companies. If you have any questions, please contact your BNN tax advisor at 1-800-244-7444.

Disclaimer of Liability: This publication is intended to provide general information to our clients and friends. It does not constitute accounting, tax, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.

IRS CIRCULAR 230 DISCLOSURE:
Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachment) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter. Please contact us if you wish to have formal written advice on this matter.