The Changing W-2 & 1099 EnvironmentParticipate on Twitter: Follow @nfiblive and use hashtag #nfiblive Download slides at: The Changing W-2 & 1099 EnvironmentParticipate on

Participate on Twitter: Follow @nfiblive and use hashtag #nfiblive

Download slides at: http://www.nfib.com/w2deck

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



It’s now more important than ever for small business owners and operators to understand

the changing W-2 & 1099 environment.

What’s the Big Deal?



• 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

Why?



• 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

W-2 & 1099 Information



• 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

Who files it?

Form W-2



• Copy A – For Social Security Administration (SSA)

• Copy 1 – For State, City, or Local Tax Department (if applicable)

• Copy D – For Employer’s records

Employer Copies

W-2 Copy Designations



• 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

Employee Copies

W-2 Copy Designations



• 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

Mark your calendars!

2011 W-2 Due Dates



• 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

Federal Copy

W-2 Filing Extensions



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

Employee Copies




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

Employee Copies (cont.)




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

If filing on paper…

W-2 Mailing Addresses



• 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 DOs 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 DON’Ts for Paper Filing



• 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-2c

W-2 Corrections



• 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:

W-2c (cont.)

W-2 Corrections

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



• 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

Social Security Tax Withholding

W-2 Changes for 2011



• 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

Advance Earned Income Credit (EIC) Payments

W-2 Changes for 2011



2011 W-2, Box 9

2010 2011



• 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

Box 12 Code Changes

2011 W-2, Box 12



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

Box 12 Code DD

2011 W-2, Box 12, Code DD



• 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

Kind of Employer Check Boxes

W-3 Change for 2011



2011 W-3, Box b



2011 W-3c



• 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

Changes for the W-2 in 2012?

2012 W-2



• 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

Who files it?

Form 1099-MISC



• 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

What other information is reported?

Form 1099-MISC



• Copy A – For Internal Revenue Service (IRS)

• Copy 1 – For State Tax Department (if applicable)

• Copy C – For Payer

Payer Copies

1099-MISC Copy Designations



• Copy B – For Recipient

• Copy 2 – To be filed with Recipient’s State Tax Return (if applicable)

Recipient Copies

1099-MISC Copy Designations



• 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

Mark your calendars!

2011 1099 Due Dates



• 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

Federal Copy

1099 Filing Extensions



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

Recipient Copies




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

Recipient Copies (cont.)




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

Group 1

1099 Mailing Addresses



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

Group 2

1099 Mailing Addresses



• 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 DOs 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 DON’Ts for Paper Filing



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 Corrections

http://www.irs.gov/pub/irs-pdf/i1099gi.pdf





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

TIN Truncation

1099 Changes for 2011



• 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

TIN Truncation (cont.)

1099 Changes for 2011



• 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

Expanded Reporting was Repealed

1099-MISC Expanded Reporting



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 .

Your Records

W-2 & 1099 Retention



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

E-File Requirements

W-2 & 1099 Electronic 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

Direct Filing



• 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

Combined Federal/State Program



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 1st 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

NEW: Increased Penalties for 2011

W-2 & 1099 Penalties



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!

Requirements

Filing Requirements



The choice is between blank forms or forms preprinted with images to report your information

• Software compatibility • Instructions • Perforations • Red copies

Paper Forms

What to look for…



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

Software

What to look for…



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

Online

What to look for…



Print Blank and Preprinted

W-2 & 1099 Forms

Greatland’s Filing Solutions Complete W-2 & 1099 reporting solutions for Federal, State and Recipient Filing

W-2 & 1099 Filing Solutions

Software

WinFiler and WinFiler Plus

Desktop Software

Online

speedEfiler.com

Plus, general W-2 & 1099 knowledge and guidance!



Questions? Comments?

Contact Greatland:

EMAIL: [email protected]

ONLINE: www.Greatland.com

FACEBOOK: facebook/GreatlandCorp

TWITTER: twitter@GreatlandCorp

YOU TUBE: YouTube/GreatlandCorporation

LINKED IN: Greatland

mailto:[email protected]

http://www.greatland.com/



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

http://www.irs.gov/businesses/small/index.html

http://www.ssa.gov/







Join NFIB in supporting Small Business for Father’s Day!

Shop for Pop: NFIB’s Father Day Small Business Promotion

Submit your best deal and find other local businesses to shop at!

http://www.nfib.com/shop-for-pop

Stay Connected with NFIB

We want your feedback. If you enjoyed today’s webinar or have suggestions for the future, please fill out the short survey: http://www.nfib.com/webinar-feedback

For more information about the Small Business Webinar Series

visit:

http://www.NFIB.com/webinars






http://www.nfib.com/webinars/webinar-feedback



http://www.nfib.com/webinars

Documents

The Changing W-2 & 1099 EnvironmentParticipate on Twitter: Follow @nfiblive and use hashtag #nfiblive Download slides at: The Changing W-2 & 1099 EnvironmentParticipate on