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Archives for June 2020

I Can’t Pay My Business Taxes On Time. What Do I Do?

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Don’t panic. You have options.  What To Do When You Realize You Can’t Pay Your Business Taxes First, don’t panic. This happens to many business owners. Second, be sure to file on time, even if you can’t afford to pay in full at that time.  Next, review your options. Understand that no matter how you proceed, your debt will accrue interest until you pay the IRS in full. And the IRS will not waive interest charges. Double-check your books to see if you can pay the IRS in full before moving forward with payment options. Then, be sure to respond to the IRS’s notice within 30 days of receiving it. This means collecting all of your business’s financial information, including pay stubs, rental or lease agreements, mortgage statements, lease and loan documents, and utilities documents. Call the IRS at 800-829-4933 for assistance. The IRS can help you determine the best payment option for you based on your current circumstances. You Have 4 Options if You Can’t Pay Your Business Taxes On Time Full Payment Agreement Installment Agreement  Offer in Compromise or Partial Payment Installment Agreement Temporarily Delay Collection  A Full Payment Agreement provides you with additional time to pay your business taxes in full. The timeframe is up to 120 days.  An Installment Agreement is a monthly payment plan. You can discuss your needs with the IRS about payment options and set up a payment plan with them. A monthly payment plan may work well with your monthly budget if you cannot pay in full within 120 days.  An Offer in Compromise is when you and the IRS create an agreement that determines a reduced payment amount to resolve your tax liability. You are essentially compromising on the debt amount. The IRS will only consider an Offer in Compromise if you are up-to-date on all tax filing and all other tax payments, including quarterly taxes.  A Partial Payment Installment Agreement lies somewhere between an Installment Agreement and an …

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I Received A “B Notice.” Now What? + How To Avoid Them

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To avoid receiving B Notices, it’s important to be proactive whenever you onboard a new non-employee.  What Is A “B Notice”? A “B Notice” is part of the IRS’s Backup Withholding Program, which provides notices to payers (such as businesses) who file certain information returns with incorrect Taxpayer Identification Numbers (TINs), which includes Social Security Numbers (SSNs) and Employer Identification Numbers (EINs). These notices begin the backup withholding process. “Backup withholding” means withholding income tax from independent contractors or other non-employees. As a business owner, you receive the notice, but it is up to you to inform your independent contractor or other non-employee that they provided the wrong TIN number to you. The IRS cannot contact your contractor (the payee) because they have the wrong TIN number on file. What To Do With A B Notice When you inform the payee about this situation, you must do a few things: Send a copy of the B Notice to the payee and request that they fill out an updated W-9 form with their correct TIN and full name. It’s best if you provide them with the W-9 form. Begin withholding taxes immediately at the rate of 24% if: the IRS says the taxpayer ID is missing. you cannot find the payee. the payee refuses or fails to provide a TIN. the TIN is obviously incorrect (e.g. it’s not 9 digits). Double-check that the new W-9 form has a different TIN than the old form.  At this point, the payee should send the W-9 to the IRS.  If you receive a second B Notice, continue withholding income taxes. The payee is responsible for resolving the issue with the IRS directly. The IRS will inform you when the payee’s TIN has been corrected. At that point, you can stop withholding income taxes. What To Do After the TIN Is Updated After the matter is resolved, you need to pay the withheld taxes to the IRS, report them to the IRS using Form 945, and include the backup withholding …

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Do You Need a Filing Extension?

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Do you want more time to prepare your federal tax return? Then apply for a filing extension.  What is a Filing Extension?  Requesting a filing extension means that you are asking the IRS for additional time to file federal tax forms, giving you more time to collect the necessary details to complete them.  But, if you owe money to the IRS, the payment deadline will not change, even if you are granted the extension. Also, you will still need to furnish statements to recipients by the deadlines. You can apply for an extension of time to file the following forms: W-2 W-2G 1042-S 1094-C 1095 1097 1098 1099 3921 3922 5498 8027 What are the Requirements for Filing an Extension?  To receive an extension, you must need additional time to file your returns accurately. According to the IRS, if you are requesting an extension for Forms W-2 or 1099-MISC reporting NEC only (now 1099-NEC), you must meet one of the following criteria: The filer suffered a catastrophic event in a federally declared disaster area that made the filer unable to resume operations or made necessary records unavailable Death, serious illness, or unavoidable absence of the individual responsible for filing the information returns affected the operation of the filer Fire, casualty, or natural disaster affected the operation of the filer  The filer was in the first year of establishment  The filer did not receive data on a payee statement such as Schedule K-1, Form 1042-S, or the statement of sick pay required under section 31.6051-3(a)(1) in time to prepare an accurate information return  How Can I Request an Extension?  To request an extension, you must file Form 8809, Application for Extension of Time To File Information Returns. Currently, to apply for a filing extension for Forms W-2 and 1099, you can only submit the paper form to: Department of the Treasury, Internal Revenue Service Center, Ogden, UT 84201-0209. Learn more from the IRS at this link. When you …

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How has Form 1099-MISC Changed with the Return of Form 1099-NEC? 

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With the return of Form 1099-NEC, Form 1099-MISC is going to look different starting this year, 2020. How Does Form 1099-MISC Look Different? Here are the changes to Form 1099-MISC: Box 7 → Previously used to report non-employee compensation, which has moved to Form 1099-NEC, this checkbox is used to report if a payer made direct sales of $5,000 or more of consumer products to a buyer (recipient) for resale. Box 9 → Formerly used to report the above, this box allows for a dollar amount of crop insurance proceeds. Box 10 → Formerly used to report the above, this box allows for a dollar amount of gross proceeds paid to an attorney. Box 12 → Previously a blank box, this optional box allows for Section 409A deferrals. Box 14 → Formerly used to report gross proceeds paid to an attorney, this box now allows for a dollar amount of non-qualified deferred compensation for a non-employee that violates Section 409A, which is also reported in Box 1 of Form 1099-NEC. Box 15 → Previously split into two parts, “a” and “b,” this box is used to report the dollar amount of state tax withheld. Box 16 → Previously used to report the above, this box is used to note the payer's identification number assigned by the individual state. Box 17 → Formely used to note the above, this box is used to report the dollar amount of state income.  As you can see, most of these boxes shifted one “up” and Box 18 was eliminated.  View all copies of each form at these links: 2020 and 2019. Dos and Don’ts for Form 1099-MISC Do use Form 1099-MISC for miscellaneous income, such as rents, royalties, and other income. Do report gross proceeds to an attorney (not fees) on Form 1099-MISC. Do report real estate rentals paid for office space for amounts of $600 or more on Form 1099-MISC, unless you pay a real estate agent or property manager; in that case, they should fill out Form 1099-MISC on your behalf. Do complete a 1099-MISC if you made royalty payments of at least $10 during …

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Form 1099-NEC: What Does It Mean For Your Business?

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Starting in tax year 2020, Form 1099-NEC replaces former Box 7 on Form 1099-MISC. What Is Form 1099-NEC? This form solely reports Non-Employee Compensation (NEC). It replaces the use of Form 1099-MISC for reporting non-employee compensation (formerly Box 7).  The odd thing about Form 1099-NEC is that it’s not a new form at all. It was last used in 1982 but was retired. However, the IRS realized that reporting non-employee compensation on Form 1099-MISC was too complicated because the one form had multiple due dates for various boxes on the form. Learn more about why 1099-NEC returned here. What Is 1099-NEC Used For? Starting in tax season 2020, you will need to fill out Form 1099-NEC if you paid any worker $600 or more during the calendar year in non-employee compensation. This includes: You paid someone who is not your employee You paid for services in the course of your trade or employment You paid an individual, partnership, estate, or corporation Non-employee compensation includes the following payment types to independent contractors: Fees Commissions Prizes Awards Other forms of compensation for services How Do You Fill Out Form 1099-NEC? When filling out Form 1099-NEC, you will need the following information: Business’s name, address, and phone number Business’s TIN (Taxpayer Identification Number) Recipient’s name, address, and TIN Total non-employee compensation Federal and state income tax withheld Like Form 1099-MISC, there are multiple copies of Form 1099-NEC you must distribute: Copy A to the IRS Copy 1 to the State tax department, if applicable Copy B to the independent contractor Copy 2 to the independent contractor for his or her state income tax return Copy C to keep in your business records You can file Form 1099-NEC electronically or by mail.  What Else Moves From Form 1099-MISC to 1099-NEC? In addition to the typical independent contractor payments, you will now report the following on the 1099-NEC …

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