1. WELCOME Back to School Basics – Form 1099 MISC

2. Agenda  Purpose of Form 1099 MISC  Typical Recipients  Overview – Line by Line Detail  Filing Requirements Back to School Basics - Form 1099 MISC

3.  A record of income received from a business for services rendered  Cost-cutting alternative for companies needing specific tasks completed  Non-employee compensation means no company paid taxes  No need to provide benefits or offer employee incentives  No risk of investment loss to the company  Typically the relationship can be ended once the task is completed Purpose of Form 1099 MISC

4.  Independent Contractor or “freelancer”  Actors, novelists, freelance writers and other creative artists  Also used to report income from the following :  At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest  Gross proceeds of $600 or more paid to an attorney  Fishing boat proceeds  $600 or more in Rents, services, prizes and awards Form 1099 MISC Recipients

5.  $600 or more in medical and health care payments, crop insurance proceeds, cash payments for fish  $600 or more in cash paid from a national principal contract to an individual, partnership, or estate  $600 or more in other income payments  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 Recipients

6.  Payroll departments usually handle the “other income” payments and nonemployee compensation  Audience Poll – Does your business hire Independent Contractors? Overview – Line By Line Detail

7.  Payer’s Information  Identification Numbers  Recipient’s Information  Account Information  2 nd TIN Not Overview – Line By Line Detail

8.  Box 1 – Rents  Box 2 – Royalties  Box 3 – Other Income  Prizes and awards  FMV of merchandise from game shows or sweepstakes  Punitive Damages  Compensatory damages for non-physical injuries or sickness  Damages received for emotional distress  Physical symptoms from emotional distress reportable  Damages received due to emotional distress from physical injuries or sickness NOT reportable Overview – Line By Line Detail

9.  Payments of a deceased employee’s wages  Estate or Beneficiary  Payments of Indian gaming profits or to Tribal Members  Termination payments to self-employed insurance salespeople  Box 4 – Federal Income Tax Withheld  Backup Withholding  Box 5 – Fishing Boat Proceeds Overview – Line By Line Detail

10.  Box 6 – Medical and Health Care Payments  $600 or more to physicians and medical/health care service providers  Includes payments made by medical and health care insurers under health, accident and sickness insurance programs  No requirement to report payments to pharmacies for prescription drugs *Corporation exemption applies when payments made to a health care provider are done through a credit or debit card in an FSA, HRA or HSA. Overview – Line By Line Detail

11.  Box 7 – Nonemployee Compensation  $600 or more  Fees, commissions, prizes and awards for services performed  Expenses incurred for the use of an entertainment facility  Federal executive agencies  Conditional Guidelines  Non employee payment  Services in the course of the payer’s trade or business  Individual or partnership  $600 or more Overview – Line By Line Detail

12.  Box 7 common examples  Professional Service Fees  Referral Fees  Fees and travel reimbursement not accounted to the payer if the fee and reimbursement total is at least $600 or more  Non-employee entertainers for services  Taxable Fringe Benefits to nonemployees  Directors fees  Nonqualified deferred compensation (409A) Overview – Line By Line Detail

13.  Box 8 – Substitute Payments in Lieu of Dividends or Interest  Definition of “Substitute Payment” means a payment in lieu of:  Tax-exempt interest that has accrued while a short sale was open and  A dividend if the ex-dividend date is after the transfer of stock for use in a short sale and before the closing of the short sale Overview – Line By Line Detail

14.  Box 9 – Payer Made Direct Sales of $5,000 or More of Consumer Products to a Buyer (Recipient) for Resale  Enter X if applicable  Do not enter a dollar amount  Box 10 – Crop Insurance Proceeds  Boxes 11 and 12 – Foreign Tax Paid and Foreign Country or US Possession (For 2013)  Box 13 – Excess Golden Parachute Payments  Box 14 – Gross Proceeds Paid to an Attorney Overview – Line By Line Detail

15.  Box 15a – Section 409A Deferrals  Box 15b – Section 409A Income  Amounts considered subject to a substantial risk of forfeiture are not included  Also reported in Box 7  Box 16 – State Income Tax Withheld  Box 17 – State/Payer’s State Number  Box 18 State Income Overview – Line By Line Detail

16.  TIN (Tax Identification Number)  What is a TIN  When is a TIN required  Missing or Incorrect TIN  Not provided  Less than 9 digits  Mixture of digits and numbers Filing Requirements

17.  IRS 1099 TIN Matching Process  TIN’s are matched against two files:  All SSN’s issued by the SSA  All IRS assigned employer identification numbers (EINs)  CP2100/2100A Notice  “B” Notice  Incorrectly Reported TIN by the payee  Correct the data in the system, do not send B Notice Filing Requirements

18.  Provided TIN and Name Control do not match  Send B Notice to payee  Procedure when a TIN is not Provided  Backup Withholding @ 28%  W-9  Report withholding on Form 945- Annual Return of Federal Income Tax Withheld Filing Requirements

19.  When to File 1099 MISC  Reporting Period  February 28 th of the following Tax Year  Form 1096  Must be properly addressed and mailed by the due date to be considered timely  Holidays and Weekend due dates Filing Requirements

20.  Electronic Reporting  Automatic Extension of 1 month  Must be reported via Filing Information Returns Electronically (FIRE) system  250 or more forms  Recordkeeping Requirement  3 years from the due date of the returns  4 years from the due date of the returns if backup withholding was imposed Filing Requirements

21. **ELECTRONIC FILING IS NOT ACCEPTED ON MAGNETIC MEDIA FOR 1099 MISC RETURNS**  https://fire.irs.gov https://fire.irs.gov  Test files can be submitted in advance to http://fire.test.irs.gov Filing Requirements

22. http://www.irs.gov/pub/irs-pdf/i1099msc.pdfhttp://www.irs.gov/pub/irs-pdf/i1099msc.pdf - Instructions for Filing Forms 1099 MISC http://www.irs.gov/pub/irs-pdf/f1099msc.pdfhttp://www.irs.gov/pub/irs-pdf/f1099msc.pdf - Form 1099 MISC http://www.irs.gov/pub/irs-pdf/p1220_11.pdf - Publication 1220http://www.irs.gov/pub/irs-pdf/p1220_11.pdf - Publication 1220, Specifications for Filing Forms 1099 electronically References

23. THANK YOU FOR ATTENDING! JILLIAN ROBINSON, CPP PENSOFT (757) 873-1199 JROBINSON@PENSOFT.COM Thank You