Who Should Receive a 1099-MISC

Should I have Received a 1099?

Tax Return Preparation in Spring Hill, TNTax season is upon us and we, at JBL Accounting & Tax Professionals, get the questions “Who Should Receive a 1099-MISC?”  This can be confusing subject because different rules apply to different situations.  So let’s dive in and see if we can make the muddy water somewhat clearer.

The Internal Revenue Service, or IRS, requires businesses to file informational returns reporting gross proceeds paid in the amount of $600.00 or more to unincorporated taxpayers and some businesses.  Form 1099-MISC is one of the most common informational returns used for this reporting feature.  The IRS uses these returns to track income received by unincorporated taxpayers and some businesses in an attempt to thwart underreporting of income.  To avoid unintentional underreporting of income, you should know who is subject to informational reporting.

Facts

Generally, you must postmark any form 1099-MISC you issue by January 31st of each year, except when it falls on a weekend, in which you will have until the following Monday.  Copy B is for the taxpayer records.  The IRS receives copy A of form 1099-MISC and Form 1096 which summarizes all the 1099-MISC.  These forms are required to be postmarked by February 28, except when it falls on a weekend, in which case you will have until the following Monday.  The IRS does not require taxpayers to submit a copy of form 1099-MISC with the annual income tax return.

 Business Services

Rent payments not associated with personal payments are reportable transactions.  Examples include your business renting space, equipment or other assets paid to any one vendor.  Gross rental proceeds are reported in box 1 of your form 1099-MISC.  Physicians and other healthcare providers paid more than $600 or more from your business, in a single tax period, receive form 1099-MISC with gross proceeds reported in box 6.  Legal services rendered by attorneys require informational reporting of gross proceeds in box 14 of form 1099-MISC.

Individuals

Individuals and unincorporated businesses receive form 1099-MISC for services performed.  Individuals receiving services are not required to furnish informational returns to service providers.  Taxpayers working on fishing boats receive form 1099-MISC reporting their share of catch income reported in box 5.  There are no minimum gross proceeds required to report fishing boat income.  Non-employee individuals and unincorporated businesses receiving proceeds for services rendered are subject to informational reporting.  Non-employee compensation is the most common income reported on form 1099-MISC, with gross proceeds reported in box 7.

Proceeds

Businesses paying proceeds to individuals and other businesses report income on form 1099-MISC, in box 3.  These proceeds include winners of prizes, awards and sweepstakes, punitive damages and other income not from services rendered.  Report cash values; however, if the payment is not cash, report fair market value at the time of the payment.  Farmers who receive monies from insurance companies receive a form 1099-MISC.  Gross crop insurance proceeds of $600 or more in a single tax period would be reported in box 10.

Other Income

Various other forms of payment require the issuance of form 1099-MISC to recipients.  Taxpayers receiving royalties in excess of $10, before reductions for taxes, commissions and more, report in box 2.  Aggregate payments of $10 or more, made to securities brokers on behalf of their clients, in lieu of tax-exempt interest or dividends, are reported in box 8 of form 1099-MISC.  Taxpayers receiving golden parachute payments in excess of the base amount should report it in box 13 of form 1099-MISC.

JBL Accounting & Tax Professionals is only a phone call away to help either walk you through the process or set up an appointment to complete the 1099-MISC process for you.

JBL Accounting & Tax Professionals is based in Spring Hill, Tennessee. We offer professional accounting and tax services to the entire Middle Tennessee area including, Franklin, Brentwood, Cool Springs, Columbia, and all of the Greater Nashville area.

Contact us today to see how we can help you!

(615) 392-0522

The Pitfalls of Preparing Your Own Tax Return

The Pitfalls of Preparing Your Own Tax Return

In recent years, it has been more and more common for individuals to try to prepare and file their own personal tax return.  This statistic has increased due to multiple factors, such as, economic downturn, availability of low-cost tax software, and disillusionment with dedicated tax return preparation companies.  This has spurred an increase in do-it-yourself taxpayers.  Unfortunately, this do-it-yourself tax preparation does have drawbacks for individuals that have a more complex portfolio.

Often, basic mistakes are made and have been known to cause delays in refund processing and sometimes have led to audits.  As Accountants and IRS Mediators, we have seen many errors and have assisted many individuals in making corrections and negotiating with the IRS for reductions in penalties and fines.  To help prevent some of these issues from happening, JBL Accounting and Tax Professionals have compiled a list of the…

The Top 10 Mistakes Made on Tax Returns:

    1. Failure to provide your Social Security Number or other required information.

      Incorrect or missing social security numbers are one of the most common mistakes made in preparing tax returns.  Be sure to double-check all numbers for accuracy.

    2. Incorrect Filing Status or Exemptions:
      • Check only one filing status box.
      • Check the appropriate exemption boxes and include the correct social security number for each exemption.
      • Your name and the names of your spouse, dependents, and qualifying children for earned income credit or child tax credit must be exactly as they appear on their social security cards. If there have been any name changes, go to http://www.ssa.gov/gethelp1.htm .
      • Enter your total number of exemptions.
    3. Computation Errors:

      Double check all your calculations.  Simple mathematical errors can cause major delays in the processing and time it takes to receive your refund.  The most common computational errors include:

      • Taxable income
      • Withholding and estimated tax payments
      • Earned income credit
      • Standard deduction for those 65 or older or blind
      • Taxable amount of social security benefits
      • Child and dependent care credit
    4. Incorrect Tax Calculations

      Entering the wrong tax for your taxable income and filing status is a very common mistake. If you use the tax tables, be sure to use the column that corresponds to your filing status.

    5. Failure to correctly enter taxes paid:

      Be sure to enter your withholding and estimated tax payments on the correct lines.

    6. Failure to correctly identify child care providers.

      Missing or incorrect provider identification numbers are a very common mistake.  Like with your Social Security Number, it is imperative that you enter the correct Tax Identification Number of your Child Care Provider.   Double check your entries, and verify with your provider.

    7. Incorrect Bank Routing and Account Numbers for Refunds

      The majority of individuals are requesting direct deposit of their refunds.  Direct Deposit refunds are usually received faster than requesting a physical check from the IRS.  If you have chosen this method for your refund, be sure that your account number and bank routing number are correct.  Incorrect numbers can cause your refund to be deposited into another person’s account or delayed.

    8. Failure to sign and date your return.

      If you are not e-filing your return you must physically sign the return before you mail it.  If you are filing jointly, both spouses must sign and date the return.

    9. Failure to attach all required form.

      Be sure that you have a Wage or Tax Statement or Form W-2 from each of your employers. Attach Copy B of each Form W-2 and any other forms that show federal income tax withheld, such as Form 1099-R,  to the front of your tax return. Combine the wages and withholdings from all of your W-2s on one return. Be sure to attach all other necessary forms and schedules to your tax return in the sequence indicated by the number in the upper right-hand corner of the form.

    10. Improper Payment or Mailing:

      If your return shows that you owe tax, include a check or money order payable to the “United States Treasury.” If you use a payment voucher, Form 1040-V, be sure to include it with your return. You can also pay your tax with a credit card. Your payment must show the following:

      • Your name
      • Address
      • Social security number
      • Daytime telephone number
      • Tax form number and year

Before you send your information, be sure to:

    • Review your entire tax return carefully, since mistakes can delay processing.
    • Make a copy of your signed return and all schedules for your records.

Mail your tax return in the pre-addressed envelope that came with your tax booklet. If you do not have a pre-addressed envelope, look in the “Where Do You File?” section of the tax instruction booklet or go to http://www.irs.gov/file/index.html  to find where to mail your return. Use the correct amount of postage.

Double checking your return and sometimes triple checking it can prevent major delays with the IRS processing your tax refund.  Remember, the tax preparation software out there is great for simple returns, but even common life events, such as a home purchase, foreclosure, short sale, the birth of a child, or the death of a spouse can lead to complications that even the best software can’t handle.   Many people will qualify for more tax credits than they are aware of, and the tax software may not guide you through checking your eligibility.

It never hurts to check all of your options prior to committing yourself to self-preparation.  Contact JBL Accounting & Tax Professionals for your free consultation.

JBL Accounting & Tax Professionals is based in Spring Hill, Tennessee. We offer professional accounting and tax services to the entire Middle Tennessee area including, Franklin, Brentwood, Cool Springs, Columbia, and all of the Greater Nashville area.

Contact us today to see how we can help you!