November 24, 2014
As the current tax year draws to a close, we encourage you to begin assembling information that will be needed to prepare and file your 2014 Annual Information Tax Returns; Form 1096, 1099 and in some instances, Form 1098 (Mortgage Interest Statement). Form 1099-MISC is the most common information return that business entities, self-employed individuals and those who own rental or farm properties are required to file to report non-employee compensation, legal fees or rents paid during the calendar year. Form 1099-INT is used to report interest paid and Form 1099-DIV is used to report dividends paid. Entities or individuals who collect mortgage interest on any one mortgage in the calendar year must file Form 1098 to report the interest to the payor.
At this time, please review your files and records to make certain that you are well prepared to comply with current information tax return reporting requirements. Verify you have the current address and contact information for recipients of 1099s and 1098s in prior years, and that you have a current Form W-9 for new service providers. We ask you to organize your records now so that you can timely file the applicable information tax returns. You must provide the appropriate Forms 1099 and 1098 to the recipients no later than February 2, 2015. The returns must be filed with the Internal Revenue Service by March 2, 2015. If you file electronically, which we encourage all clients to do, the deadline to file with the Internal Revenue Service is March 31, 2015. Your information returns will be filed electronically unless you notify our office that you prefer to paper file.
Periodically, taxpayers receive a notice from the Internal Revenue Service that there is a discrepancy between the tax identification number provided by 1099 recipients and information on record with the Internal Revenue Service. If you received correspondence like this during the year, we recommend that you send another Form W-9 to parties identified on the notice to make certain your records are accurate and to avoid similar correspondence regarding your 2014 submissions. Please instruct these parties to complete and sign a new Form W-9 and return it to you no later than December 31, 2014. We also recommend that you consider sending a Form W-9 to all new non-corporate vendors to ensure you have current mailing addresses and tax identification numbers on file. We are enclosing a Form W-9, Request for Taxpayer Identification Number and Certification, to send to any potential 1099 recipients for whom you have incomplete information or wish to update your records.
The following lists will be helpful in determining who is required to receive a 1099 and what information we will need to facilitate the timely preparation of these information returns for you.
A 1099 is required to be issued to each person or other unincorporated entity that you have paid:
- $10 or more in royalties, interest or dividends
- $600 or more in rents, services, prizes and awards and other income payments to individuals and unincorporated entities
- $600 or more in legal services and gross proceeds paid to an attorney, including incorporated entities
We recommend that you issue a 1099 if you receive a Form 1099 for amounts that actually belong to another person or business.
A 1098 is required to be issued to the payor of mortgage interest paid to you if you received $600 or more in interest.
Payments for which a 1099 is not required:
- Payments to a corporation (excluding legal fees and gross proceeds paid to attorneys)
- Payments for rent to real estate agents
- Payments for goods
- Payments made by credit card
- Payments for personal (non-business related) expenses
When you send to us the information to prepare your 2014 annual information returns, please include the following information:
- A copy of the signed Forms W-9, Request for Taxpayer Identification Number and Certification, completed by the recipients with whom you contracted for their services during the 2014 calendar year for whom you have not previously provided us with their Form W-9.
- Updated addresses for any recipients you previously provided to us, if applicable.
- If the recipient is a sole proprietor or an individual, please provide the individual’s full name, social security number, payment amount and their address. The regulations provide that the social security number be used to report payments made to individuals and sole proprietors.
- If the recipient is not a sole proprietor or an individual, please provide the entity’s name, Employer Identification Number, payment amount and their address.
To be assured that the recipients receive their 1099 by February 2, 2015, please arrange to have your information to our office no later than January 19, 2015.
If you have any questions, please feel free to call our office at 415.398.5900.
Scott B. Price