Newsletters 

January 2010

January is the time for preparing information returns required by the IRS. Discussed below are some important aspects of the filing requirements for these returns. These requirements apply only to payments made in the course of a trade or business. Personal payments are not reportable.

FORM 1099 - PAYMENTS MADE

Frequently Used Forms.

There are many types of 1099s. In our experience, the three most frequently used 1099 forms by small businesses and nonprofits are the 1099-MISC, 1099-INT and 1099-DIV.

Who Must File?

All businesses, including partnerships, corporations, or sole proprietorships, who make reportable payments.

Which Form Should Be Filed?

Form 1099-MISC is used for any reportable payment of $600 or more per calendar year that is not reportable on any other 1099 form. Reportable payments include the following:

1. Rents (building, property, etc.)
2. Royalties
3. Other income payments
4. Medical and health care payments. Payments made under a flexible spending arrangement or a health reimbursement arrangement that is treated as employer-provided coverage under an accident or health plan are excluded.
5. Non-employee compensation including fees and commissions for services (including parts and materials). Non-employees include: independent contractors, contracted services, outside consultants, (attorneys, accountants, janitors, etc.).

NOTE: Generally, payments to corporations are not reportable, however, all payments to attorneys, even if the attorney is incorporated, must be reported on Form 1099-MISC.

Form 1099-INT is to be used for any reportable payment of interest of $600 or more ($10 if you are in the business of lending, i.e., banks) per calendar year. Interest paid on an obligation issued by an individual is not required to be reported. Interest paid to certain payees, including corporations, tax-exempt organizations and IRAs, is also not reportable.

Form 1099-DIV is used to report dividend and capital gain income from stocks and mutual funds. File Form 1099-DIV for each person:

1. To whom you have paid dividends (including capital gains dividends) and other distributions on stock of $10 or more,
2. For whom you have withheld and paid any foreign tax on dividends and other distributions on stock,
3. For whom you have withheld any Federal income tax under the backup withholding rules, or
4. To whom you paid $600 or more as part of a liquidation.

Form 1096 (Annual Summary and Transmittal of U.S. Information Returns) must be used to summarize and transmit the required Forms 1099 to the Internal Revenue Service. A separate Form 1096 must be used for each type of Form 1099.

If you are required to file 250 or more information returns, you must file using magnetic media. The 250-or-more requirement applies separately to each type of form.

When Must They Be Filed?

Form 1099 for calendar year 2009 should be provided to the qualifying recipient by February 1, 2010 and, most importantly, mailed to the Internal Revenue Service (with Form 1096) by March 1, 2010.

What Are The Penalties?

The penalties range from $15 to $50 per information return. In addition, there is a minimum penalty of $100 per information return imposed for intentional disregard of filing an information return. Penalties will also be incurred if copies are not properly provided to recipient.

FORM 1042, FOREIGN PERSON'S U.S. SOURCE INCOME SUBJECT TO WITHHOLDING

Federal Form 1042 must be filed by March 15, 2010 for any rents, interest or dividend payments made to foreign individuals or foreign entities during the calendar year ending December 31, 2009.

PROPERTY TAX REPORTS

Personal Property Tax Reports are due on April 30, 2010.

If you do not receive these forms, please contact the Tax Assessor's office for your county.

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The information included in this letter is intended to provide a general overview of the basic filing requirements for these forms. There are additional filing requirements and special exceptions that have not been noted above. If you would like additional information about filing these or other information returns, or need assistance in the preparation of these forms, please do not hesitate to contact our office at (360) 734-8715.