1. 1099 Corrections Refresher
WEBINAR
1099 Corrections Refresher
SPEAKER
Paul Banker – General Manager
Sovos Compliance
Seth Zellner – Pollster

2. Agenda Introduction How to handle Best practices
Messaging around corrections
Timing overview
Penalties

3. Introduction Introduction to Sovos Compliance:
Introduction to the call
Introduction to Sovos Compliance:
+30 years experience entirely dedicated to tax information reporting.
#1 private filer of 10-series forms (1099’s, 1098’s, 1042-S forms) in the U.S., annually processing over 400 million forms & more than 1 billion transactions.
Helping organizations of all sizes with over 4,000 clients and serving nearly half of the Fortune 500.
Paul Banker
General Manager
Seth Zellner
Sales Engineer/Pollster

4. How to handle corrections

5. Physical copy delivery
Consider lead times
Print notes and messaging
Transaction level detail
1099
1099
1099

6. Electronic delivery Reduce time and costs Can be available immediately
Increase customer satisfaction

7. VS Transmitting Electronic 1220 vs paper 1096
Current year vs prior year rules VS

8. 1042-S changes affecting corrections
Unique identifier
Number of times
amended
Tracking these items
to become vitally
important
Expected to move to
other form types

9. Best Practices

10. Best practices to avoid corrections
Load data into processing platform more frequently
Utilize the name and TIN matching service
Proactively solicit for correct information

11. Additional best practices
Perform a pilot season
Reconcile forms back to source systems
Reconcile withheld amounts to remittances made
Update corrected records in tax system AND source system

12. Reconciling Usually manual Done via spreadsheet, database, napkin…
Time consuming in January
Finding the needle in
the haystack
Find ways to automate
Reconcile frequently
Acct GL amt 1099 amt
224568
$ $18.28
$ $845.25
$ $17.65
$95.25 $95.25
$ $115.05
$ $555.65
$ $200.52
$1.58 $1.58
$11.00 $11.00
$ $980.73
$ $54.23
$12.98 $12.98
$17.25 $17.25
$ $0.00
Acct GL amt 1099 amt
$12.51 $58.52
$ $18.28
$ $845.25
$ $17.65
$95.25 $95.25
$ $115.05
$ $555.65
$ $200.52
$1.58 $1.58
$11.00 $11.00
$ $980.73
$ $54.23
$12.98 $12.98
$17.25 $17.25
$ $0.00
Acct GL amt 1099 amt
$17.59 $58.52
$ $18.28
$ $845.25
$ $17.65
$95.25 $95.25
$ $115.05
$ $555.65
$ $200.52
$1.58 $1.58
$11.00 $11.00
$ $980.73
$ $54.23
$12.98 $12.98
$17.25 $17.25
$ $0.00

13. The ½ of 1% rule
Reduce your B-notice volume to ½ of 1% of your form volume
Eliminate your 972CG

14. Timeline Review

15. Timelines, they are a changin’
PATH Act – Section 201 has advanced filing deadlines for a subset of information returns
January 31st due date for filing Forms W-2 and 1099-MISC (non-employee compensation)
Effective with returns filed for 2016
Originates from Senate Finance Committee
proposals to reform the code

16. Correction Filings When corrected returns are filed matters
Penalties change
Customer satisfaction considerations

17. $50 per $260 per $100 per Federal Reporting 1st & 2nd B-Notices
1st Corrections
$260 per
2nd Corrections
Penalty Notices
$100 per
(1 year later)

18. Penalty Updates

19. Summary of Increase in Penalties for Failure to File
Summary of Increase in Penalties for Failure to File Correct Information Returns and to Provide Correct Payee Statements (July 2015)
P. L , section 806, increased penalties for failure to file correct information returns and provide correct payee statements for information returns required to be filed after December 31, 2015.
$50 per information return if you correctly file within 30 days (by March 30 if the due date is February 28); maximum penalty $500,000 per year ($175,000 for small businesses).
$100 per information return if you correctly file more than 30 days after the due date but by August 1; maximum penalty $1,500,000 per year ($500,000 for small businesses).
$250 per information return if you file after August 1 or you do not file required information returns; maximum penalty $3,000,000 per year ($1,000,000 for small businesses).
$500 per payee statement with no maximum penalty for intentional disregard of the requirements to file or furnish a correct payee statement.

20. Inflation Increases for 2016 – Failure to File
Increase in Penalties for Failure to File Correct Information Returns and to Provide Correct Payee Statement – Inflation Increases for 2016
Additional increases in penalties have also been effectuated for failure to file correct information returns and provide correct payee statements for information returns required to be filed after Dec. 31, 2015.
Section 6721 Failure To File Correct Information Returns by the Due Date & 6722 Failure to Furnish Correct payee statements are revised as follows for 2016:
$50 per information return if you correctly file within 30 days (by March 30 if the due date is February 28); maximum penalty $529,000 per year ($185,000 for small businesses).
$100 per information return if you correctly file more than 30 days after the due date but by August 1; maximum penalty $1,589,000 per year ($529,500 for small businesses).
$260 per information return if you file after August 1 or you do not file required information returns; maximum penalty $3,178,500 per year ($1,059,500 for small businesses).
$520 per information return for intentional disregard with no maximum penalty.

21. Inflation Increases for 2017 – Failure to File
Increase in Penalties for Failure to File Correct Information Returns and to Provide Correct Payee Statement – Inflation Increases for 2017
Additional increases in penalties have also been effectuated for failure to file correct information returns and provide correct payee statements for information returns required to be filed after December 31, 2016.
Section 6721 Failure To File Correct Information Returns by the Due Date & 6722 Failure to Furnish Correct payee statements are revised as follows for 2016:
$50 per information return if you correctly file within 30 days (by March 30 if the due date is February 28); maximum penalty $532,000 per year ($186,000 for small businesses).
$100 per information return if you correctly file more than 30 days after the due date but by August 1; maximum penalty $1,596,500 per year ($532,000 for small businesses).
$260 per information return if you file after August 1 or you do not file required information returns; maximum penalty $3,193,000 per year ($1,064,000 for small businesses).
$530 per information return for intentional disregard with no maximum penalty.

22. Federal Penalties Increase Summary
Failure to Correctly File
$250 (previously $100), CAP - $3M (previously $1.5M).
With 2016 inflation increases, $260 (previously $250), CAP - $3,178,500
Further CAP increases in 2017
Corrections
Within 30 days –
$50 (previously $30), CAP - $500,000 (previously $250,000).
With 2016 Inflation increases, CAP - $529,000
Before August 1 –
$100 (previously $60), CAP - $1,500,000 (previously $250,000).
With 2016 Inflation increases, CAP - $1,589,000
Intentional Disregard
$500 (previously $250), NO CAP
With 2016 inflation increases, $520
Further increases in 2017

23. Fancy table Correction type 2015 2016 2017 Less than 30 days $50
Before August 1st
$100
After August 1st
$250
$260
Mismatched name and TIN
Intentional disregard
$500
$520
$530
Max penalty per EIN
$3,000,000
$3,178,500
$3,193,000

24. For more information, visit sovos.com/contact