The Changing W-2 & 1099 Environment Understanding Compliance & Regulation Janice Krueger, Greatland
Meet Our Speaker Janice Krueger Subject Matter Expert at Greatland 25 years of experience offering compliance W-2 and 1099 reporting expertise Member of the National Association of Computerized Tax Processors (NACTP) since 1988 Serves as the Chairperson of NACTP committees since 1991
What s the Big Deal? It s now more important than ever for small business owners and operators to understand the changing W-2 & 1099 environment.
Why? Recently, the tax gap has become more of a hot issue Internal Revenue Service (IRS) has been challenged to do more to remedy this problem Enforcing more compliance regulations Requiring more information to be reported
W-2 & 1099 Information Who needs to file these forms? What needs to be reported? Copy designations Important due dates Extension information Mailing information Filing DOs and DON Ts Corrections Changes for the current year
Form W-2 Who files it? Every employer who pays for services performed by an employee, including non-cash payments, must file a W-2 for each employee from whom: Income, Social Security, or Medicare tax was withheld Income tax would have been withheld if the employee had claimed no more than one withholding allowance or had not claimed exemption from withholding
W-2 Copy Designations Employer Copies Copy A For Social Security Administration (SSA) Copy 1 For State, City, or Local Tax Department (if applicable) Copy D For Employer s records
W-2 Copy Designations Employee Copies Copy B To be filed with Employee s Federal Tax Return Copy 2 To be filed with Employee s State, City, or Local Income Tax Return (if applicable) Copy C For Employee s records
2011 W-2 Due Dates Mark your calendars! January 31, 2012 Due date to send Copies B, 2, and C to each employee February 29, 2012 Due date to send Copy A to the Social Security Administration (SSA) on paper April 2, 2012 Due date to send copy A to SSA electronically
W-2 Filing Extensions Federal Copy An automatic 30-day filing extension may be requested by filing Form 8809, Application for Extension of Time to File Information Returns Form 8809 must be filed by the due date of the return in order to be granted the extension A second 30-day extension may be requested by filing another Form 8809 before the end of the first extension period However, this extension request is subject to review
W-2 Filing Extensions Employee Copies In order to request an extension for time to provide Forms W-2 to employees, a letter must be sent to the IRS before the due date. Internal Revenue Service Information Returns Branch, Mail Stop 4360 Attn: Extension of Time Coordinator 240 Murall Drive Kearneysville, WV 25430
W-2 Filing Extensions Employee Copies (cont.) The request for extension letter must include: Your name and address Your employer identification number (EIN) A statement that you are requesting an extension to furnish Forms W-2 to employees A reason for delay Your signature or that of your authorized agent
W-2 Mailing Addresses If filing on paper Send Copy A of Form W-2 with Form W-3 to: Social Security Administration Data Operations Center Wilkes-Barre, PA 18769-0001 If using certified mail, change the ZIP code to 18769-0002
W-2 DOs for Paper Filing DO type or print entries with black ink only DO include the decimal point and cents in monetary entries DO file forms alphabetically by employees last names or numerically by SSN DO send the whole Copy A page of Form W-2 with Form W-3 to SSA even if one of the Forms W-2 on the sheet is blank or void DO print all other copies of Form W-2 on perforated paper
W-2 DON Ts for Paper Filing DON T complete forms by hand DON T use dollar signs or commas in the monetary entries on Copy A DON T staple or tape any forms DON T fold any forms send the forms to SSA in flat mailing
W-2 Corrections W-2c If an error is discovered after filing Form W-2 with SSA, file Form W-2c to correct the errors If an error is detected on Form W-2 after issuing the form to the employee, but before it is filed with SSA, DON T file W-2c Check the VOID box at the top of the incorrect Form W-2 on Copy A Prepare a new Form W-2 with the correct information Send Copy A to SSA Write CORRECTED on the new copies B, C, and 2 and issue them to the employee
W-2 Corrections W-2c (cont.) File all copies of Form W-2c as soon as possible after an error is discovered Send Copy A of Form W-2c with Form W-3c to: Via U.S. Mail: Social Security Administration Data Operations Center PO Box 3333 Wilkes-Barre, PA 18767-3333 Other Carriers: Social Security Administration Data Operations Center Attn: W-2c Process 1150 E. Mountain Drive Wilkes-Barre, PA 18702-7997
W-2 Changes for 2011 Social Security Tax Withholding The Social Security tax withholding (for employees only) has been reduced from 6.2% to 4.2% for wage payments made in 2011 Report this amount in Box 4 on Form W-2 This amount should not exceed $4,485.60
W-2 Changes for 2011 Advance Earned Income Credit (EIC) Payments The advance earned income credit payment is eliminated for tax years beginning after December 31, 2010 Box 9, Advance EIC payments, has been shaded from the 2011 W-2 & W-3
2011 W-2, Box 9 2010 2011
2011 W-2, Box 12 Box 12 Code Changes Code CC obsolete Was used in 2010 to report HIRE wages and tips paid to qualifying employees Code DD new Used to report the aggregate cost of applicable employer-sponsored health coverage Code EE new Used to report designated ROTH contributions under a governmental section 457(b) plan
2011 W-2, Box 12, Code DD Box 12 Code DD Cost of Employer-Sponsored Health Coverage Reporting is NOT mandatory for 2011 for all employers For those employers who file less than 250 2011 W-2s, reporting is NOT mandatory in 2012 This new reporting is for informational purposes only and is NOT taxable
W-3 Change for 2011 Kind of Employer Check Boxes A new section in Box b, Kind of Employer, has been added which contains 5 new check boxes None apply 501c non-govt. State/local non-501c State/local 501c Federal govt. Purpose: to improve document matching One of these new boxes MUST be checked Be sure to check none apply if none of the other options apply
2011 W-3, Box b
2011 W-3c
2012 W-2 Changes for the W-2 in 2012? According to the draft released by IRS, it does not appear that there will be any form design changes for the 2012 W-2 at this time
Form 1099-MISC Who files it? Form 1099-MISC must be filed by any individual or entity that has: Paid at least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest Paid at least $600 in rents, services, prizes and awards, other income payments, medical and health care payments, crop insurance proceeds, cash payments for fish (or other aquatic life) purchased from anyone engaged in the trade, or the cash paid from a notional principal contract to an individual, partnership, or estate Paid fishing boat proceeds Paid gross proceeds of $600 or more to an attorney
Form 1099-MISC What other information is reported? Form 1099-MISC is also used to report direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment Form 1099-MISC must also be filed for each individual from whom federal income tax has been withheld under backup withholding rules
1099-MISC Copy Designations Payer Copies Copy A For Internal Revenue Service (IRS) Copy 1 For State Tax Department (if applicable) Copy C For Payer
1099-MISC Copy Designations Recipient Copies Copy B For Recipient Copy 2 To be filed with Recipient s State Tax Return (if applicable)
2011 1099 Due Dates Mark your calendars! January 31, 2012 Due date to send most 1099s to each recipient February 15th, 2012 is the due date for furnishing Form 1099-MISC to recipient if reporting payments in boxes 8 or 14 February 28, 2012 Due date to send Copy A to IRS on paper April 2, 2012 Due date to send copy A to IRS electronically
1099 Filing Extensions Federal Copy An automatic 30-day filing extension may be requested by filing Form 8809, Application for Extension of Time to File Information Returns Form 8809 must be filed by the due date of the return in order to be granted the extension Under certain hardship conditions an application for an additional 30-day extension may be submitted
1099 Filing Extensions Recipient Copies In order to request an extension of time to furnish Forms 1099 to recipients a letter must be sent before the due date to: Internal Revenue Service Information Returns Branch, Mail Stop 4360 Attn: Extension of Time Coordinator 240 Murall Drive Kearneysville, WV 25430
1099 Filing Extensions Recipient Copies (cont.) The request for extension letter must include: Payer name Payer TIN Payer address Type of return An explanation that the extension request is for providing statements to recipients Reason for delay The signature of payer or authorized agent
1099 Mailing Addresses Group 1 If your principal business is located in one of the following states: AL, AZ, AR, CT, DE, FL, GA, KY, LA, ME, MA, MS, NH, NJ, NM, NY, NC, OH, PA, RI, TX, VT, VA, WV Use this mailing address: Department of the Treasury Internal Revenue Service Center Austin, TX 73301
1099 Mailing Addresses Group 2 If your principal business is located in one of the following states: AK, CA, CO, DC, HI, ID, IL, IN, IA, KS, MD, MI, MN, MO, MT, NE, NV, ND, OK, OR, SC, SD, TN, UT, WA, WI, WY Use this mailing address: Department of the Treasury Internal Revenue Service Center Kansas City, MO 64999
1099 DOs for Paper Filing DO type or print entries with black ink only DO include the decimal point and cents in monetary entries DO verify that the filer s name, address, and taxpayer identification number (TIN) are the same on both Form 1096 and the attached Forms 1099 DO submit a separate Form 1096 with each type of return DO use pre-printed red drop-out ink forms when filing Copy A of Forms 1099 with IRS DO print all other copies of Form 1099 on perforated paper
1099 DON Ts for Paper Filing DON T send the same information to IRS more than once DON T use dollar signs ($), ampersands (&), asterisks (*), commas (,), apostrophes ( ) or other special characters in monetary entries or in the payee name line DON T cut or separate Copy A of 1099 Forms that are printed 2 or 3 to a sheet DON T send photocopies of any forms DON T staple, tear, or tape any forms
1099 Corrections If an error is discovered on a return that has been filed with IRS, it must be corrected as soon as possible by filing Copy A and Form 1096 with the IRS Center for your area. Follow the detailed instructions provided by IRS to correct errors http://www.irs.gov/pub/irs-pdf/i1099gi.pdf Do not submit corrected returns to IRS if only state or local information is being corrected. Contact the state or local tax department for help with this type of correction Provide corrected statements to all recipients.
1099 Changes for 2011 TIN Truncation The pilot program for truncating an individual s identifying number on paper payee statements has been extended for 2011 and 2012 Program applies to: Form 1098 series (excluding Form 1098-C), Form 1099 series, and Form 5498 series
1099 Changes for 2011 TIN Truncation (cont.) The payees identifying numbers that can be truncated are: Social Security Number IRS Individual Taxpayer Identification Number IRS Adoption Taxpayer Identification Number The identifying number can be truncated by replacing the first 5 digits of the number with either asterisks or X s Truncated SSN Example: XXX-XX-1234 ID truncations can only appear on paper payee statements
1099-MISC Expanded Reporting Expanded Reporting was Repealed The Patient Protection and Affordable Care Act which was signed into law on March 23rd 2010 would have required EXTENSIVE 1099-MISC reporting, placing an extreme burden on small businesses GOOD NEWS! On April 14th, 2011, a new law was signed repealing the expanded reporting requirements
W-2 & 1099 Retention Your Records W-2 Keep Copy D of Forms W-2 for FOUR years. 1099 If backup withholding was imposed, retain copies for FOUR years. Otherwise, retain for THREE years.
W-2 & 1099 Electronic Filing E-File Requirements Businesses are required to e-file information if they process 250 or more W-2s or 1099s (per form type) Corrections do NOT have to be filed in the same manner that the originals were filed However, any filer with 250 or more corrections (per form type) during a calendar year must file them electronically
Direct Filing Supports all W-2s and 1099s Supports all States Delivered timely to the States Meets all W-2/1099 Filing Requirements Supports all reconciliation forms No authorization is required Provides file status updates
Combined Federal/State Program W-2 is NOT supported; not all 1099s are supported Not all States participate in the program Delivered to States by IRS several months after the state deadline Does not meet all W-2/1099 filing requirements Reconciliation forms are not supported Authorization may be required No file status updates are provided
W-2 & 1099 Penalties NEW: Increased Penalties for 2011 As of January 1st, 2011, W-2 & 1099 penalties for failure to correct returns and payee statements by the due date have increased. Fines are as follows: $30 per return if filed correctly within 30 days after the due date Max penalty: $250,000 per year ($75,000 for small businesses) $60 per return if filed correctly more than 30 days after the due date, but by August 1st Max penalty: $500,000 ($200,000 for small businesses) $100 per return if filed after August 1 st or if required returns are not filed Max penalty: $1.5 million ($500,000 for small businesses) $250 per return with no maximum penalty for intentional disregard of filing requirements * A small business is defined as a business with average annual gross receipts of $5 million or less for the three most recent tax years
Filing Requirements Requirements Remember that you need to report to multiple entities. Most common are: Federal State (where applicable) Recipient The best method is one that can accomplish all filing tasks, making W-2 & 1099 reporting fast and easy for you!
What to look for Paper Forms The choice is between blank forms or forms preprinted with images to report your information Software compatibility Instructions Perforations Red copies
What to look for Software Ability to manage data throughout the year in a complete software package Print to forms E-file (Federal and State) Corrections Full Library Add-on services that make your job easier
What to look for Online Options to easily complete all reporting requirements in one place Federal, State, and Recipient filing Enter forms data online or import from software Federal & State e-filing Secure and authorized by IRS Fast and easy status tracking
W-2 & 1099 Filing Solutions Greatland s Filing Solutions Complete W-2 & 1099 reporting solutions for Federal, State and Recipient Filing Print Blank and Preprinted W-2 & 1099 Forms Software WinFiler and WinFiler Plus Desktop Software Online speedefiler.com Plus, general W-2 & 1099 knowledge and guidance!
Questions? Comments? Contact Greatland: EMAIL: Webinars@Greatland.com ONLINE: www.greatland.com FACEBOOK: facebook/greatlandcorp TWITTER: twitter@greatlandcorp YOU TUBE: YouTube/GreatlandCorporation LINKED IN: Greatland
Valuable Resources IRS Small Business and Self-Employed Tax Center: http://www.irs.gov/businesses/small/index.html Social Security Administration: www.ssa.gov Greatland s W-2 & 1099 Fact Center: http://www.greatland.com/category/resource+center/w- 2+1099+fact+center.do
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