IRS Forms come with detailed instructions, but they can sometimes be hard to understand if you aren’t a tax expert. Let’s break down some of the general IRS Forms 1098 and 1099 instructions. General Instructions for Information Returns There are several information returns listed in this 31-page general instructions sheet from the IRS for the tax year 2022. And much like the Terms and Conditions pages, IRS instructions aren’t the most exciting or easy-to-read material. They do make it as straightforward as possible, but tax codes are long and tedious, and difficult for veteran tax experts to understand – so the first thing you should remember about how to file IRS forms is that they change often. That’s why having a dedicated resource like eFile360 can be beneficial: you’ll always have a real person to reach out to with questions. The 1098 and 1099 instructions also work for a number of other information returns, like 1096, 1097, 3921, 3922, 5498, and W-2G. You’ll find a table of contents that directs you to the latest changes, who, where, and what to file, and much more. This instructions sheet is now labeled for “continuous use,” which means you can click this IRS link and it should reflect the latest changes for those information returns and the filing process to use. Filing Instructions There are a few big 1099 instructions to pay attention to when you start the filing process for these IRS forms. The first thing to remember is that right now the electronic filing threshold is set at 250 forms. That means if you have 250 or more 1099s, 1098s, etc., to file for the tax year 2022, you must file them electronically. But that’s only for right now. If new instructions or updated articles are shared by the IRS, that threshold could change, which may affect your filing process. It’s best to use electronic filing and organization like the services eFile360 offers, both for accuracy and in case the threshold changes in a way that impacts you or …
W-2 Compliance Insights
We are almost at the deadline for sending W-2s. If you’ve already sent them out, these W-2 compliance tips will be great for 2022 year-end. If not, you have a little bit of time left to tie things up and get them out to your employees. Employer Responsibilities As the employer who will be sending out the W-2s, you’re responsible for all the copies, as well. Copies B, C, and 2 are to be sent to your employee. Copy A goes to the Social Security Administration, Copy 1 is to be submitted to the state tax authority if applicable, and Copy D is for you to keep with your employer records. A single employer is only required to submit one W-2 per employee, even if the employee in question has worked in multiple roles. The only instances in which an exception would be made are if a single employee worked in multiple roles across different locations or if company ownership changed mid-year. In these special cases, W-2s must be issued for each different EIN (Employer Identification Number) that said employee worked for. Compliance and 2022 Changes The IRS recently published the Employer’s Tax Guide, which helps identify the items that employers are responsible for this tax season, as well as highlights the latest updates as they pertain to your business and operations. One update addresses the COVID-19 related credit given for sick and family leave wages. This credit is limited to leave that was taken after March 30, 2020, and before October 2021. The COVID-19 related employee retention credit has expired, and COBRA premium assistance payments credit is limited to coverage periods on or after April 1, 2021, through coverage periods that began on or before September 30, 2021. There are also some updates and reminders regarding Social Security and Medicare Tax, as well as deferment amounts of the employer share of these taxes. All of these insights can be found in the IRS 2022 Publication 15. Compliance Tips for 2022 Filing This year, employers are able to …
Tips for Minimizing Your Taxes
We all do it – we arrive at a deadline and wish we hadn’t procrastinated until the last minute – and your taxes are no different. Here are some year-round tips for minimizing your taxes. Learn Which Life Events Affect Taxes – and How While you probably aren’t thinking of it at the time, most major life events also come with tax changes. If you get married, divorced, have a child or adopt one, or experience other big changes this year, your taxes will be affected. Take the time to do some research beforehand. Knowing how your big life events will affect your taxes can help you start planning for those changes earlier, which only makes it easier for you and your family in the long run. Use the IRS Tax Withholding Estimator If you want to get way ahead of the curve, you can use the IRS’s free Tax Withholding Estimator tool. Having an accurate estimate of your withholding can do a few things. It can help you catch paycheck withholding errors quickly, and it can also ensure that you are not withholding too little tax, and thus creating a large tax bill for yourself next year. Reduce Gross Income Subject to Taxes Investopedia recently shared three moves to help reduce your taxable income and cut your taxes: Increase retirement contributions: one of the easiest ways to reduce taxable income is to increase your contributions to an employer-sponsored retirement plan or an individually held traditional IRA. Recently, the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 states that for 2020 and beyond, the age restriction of 70 ½ years has been lifted, allowing seniors to contribute to IRA accounts indefinitely. Increase your contribution (or start contributing to Roth 401(k) or Roth 403(b): These employer-sponsored plan contributions are made through your paycheck, and while they don’t provide up-front tax benefits, they do allow for tax-free withdrawals later. Profit from your losses: On the individual level, losses on …
Help! It’s Tax Season and I Need An Accountant
If you’re a small business that doesn’t have an accountant lined up for tax season, you have a few options. In this article, we’ll discuss how different finance professionals can help you during tax season as well as your options for filing your own business taxes. Option 1: Find a certified tax professional ASAP. There are two primary types of tax professionals you can seek out to complete your business taxes: Enrolled agents – These tax pros are certified by the IRS Certified Public Accountants (CPAs) – These tax pros are licensed by state boards of accountancy When it comes to choosing a tax professional between these two options, it depends on your other needs. If you just need a tax professional during tax season or if you are facing advanced tax issues, you will want to find an enrolled agent. If you want someone to provide guidance on financial matters throughout the year, you will want to hire a CPA. If you received aid from the CARES Act, then your taxes will be more complicated for the next couple of years, including this year. To work through additional tax compliance details, it’s best to hire a certified tax professional. Option 2: Hire an accountant or bookkeeper ASAP. If you cannot find a certified tax professional, you have a few more options: Accountants Bookkeepers Unenrolled preparers While not certified tax professionals, accountants and bookkeepers can help you manage your finances and may be able to provide you with guidance for filing your taxes. While searching for someone to help you with your taxes, you may also come across tax preparers who are not enrolled agents. These unenrolled preparers may have legitimate businesses, be very knowledgeable, and may have worked as tax preparers for many years. However, it’s best to proceed with caution if you choose to use an unenrolled preparer because they can prepare your taxes, but they cannot represent you before the IRS if you face tax …
Continue Reading about Help! It’s Tax Season and I Need An Accountant →
ACA Penalties & Deadlines for Tax Year 2020
The IRS issues penalties for employers who do not comply with the Affordable Care Act (ACA) Employer Mandate. For the 2020 tax year, the penalties have increased. What are the ACA penalties? Monetary penalties for filing late If you file ACA forms to the IRS after the deadline, you will be charged a minimum of $50 per return. At maximum, you may be charged $550 per return filed late. The amount increases by the number of returns not filed and the length of time it takes you to file them after the deadline. According to ACA Times, if you file late for tax year 2020, you can expect to pay the following penalty amounts: $50 per return filed late if you file within 30 days of the deadline; the penalty amount will not exceed the annual maximum, $556,500 $110 per return filed late if you file 31 or more days late, but before August 1, 2021; the penalty amount will not exceed the annual maximum, $1,669,500 $270 per return filed late when filed after August 1, 2021; the penalty amount will not exceed the annual maximum, $3,339,000 $550 per return if the IRS believes that you are intentionally disregarding this mandate; the penalty amount for this has no annual maximum However, if your gross receipts for the past three years are $5 million or less, you would be charged the same penalty amounts with lower annual maximums. Penalties for failing to comply with the ACA Employer Mandate According to Freeman Law, there are two types of penalties for employers who disregard the ACA Employer Mandate: A. When an applicable large employer (ALE): Does not offer coverage Offers coverage to less than 95% of its full-time employees and their dependents Has at least one full-time employee who receives a premium tax credit to help pay for coverage through a Marketplace Exchange B. When an ALE offers coverage to at least 95% of its full-time employees and their dependents, but at least one full-time employee receives a premium tax credit to …
Continue Reading about ACA Penalties & Deadlines for Tax Year 2020 →
Filing 1099-NEC: Dos and Don’ts
The IRS has re-introduced the 1099-NEC form for reporting non-employee compensation in an effort to smooth out the reporting process for contract labor and other related costs. Here are some of the main dos and don’ts of filing 1099-NEC. Do: File 1099-NEC Forms for Non-Employee Compensation The IRS requires reporting payments that are: made to someone who is not your employee, made for services in the course of trade or business dealings, or payments over $600 for the calendar made to an individual, partnership, estate, or even sometimes a corporation. Some examples of this include professional service fees to attorneys, accountants, or architects, fees paid between two professionals, payments for services, even parts and materials, and commissions. Don’t: Report Exceptions These exceptions do not need to be reported: payments for phone, freight, telegrams, storage, or merchandise and the like and payments for a foreign government, tax-exempt organizations, tax-exempt trusts, and payments to governments at the federal, state, and local levels. Do: Verify Recipient Taxpayer ID One of the first things you need to do is verify each recipient’s taxpayer ID. In order to complete the 1099-NEC for your contract workers, you must also have a form W-9 given to you by each recipient. Don’t: Use Form 1099-NEC for Personal Payments A big thing to remember about the new 1099-NEC form reporting is: don’t use the form 1099-NEC to report personal payments. Do: Mind Your Due Dates When filing and submitting these forms, remember the due date to distribute 1099-NECs to recipients is January 31 – though this date falls on a Sunday for 2021, so February 1 will be the deadline for the year. You must also be sure to file with the IRS by January 31 (again, February 1 for the year 2021). Don’t: Use Form 1099-NEC for Employee Wages In the same way that personal payments aren’t reported on the 1099-NEC, this form is also not for reporting employee wages. Make sure not to …