Did you change your name last year? Did your dependent have a name change? If the answer to either question is yes, be sure to notify the Social Security Administration before you file your tax return with the IRS.
This is important because the name on your tax return must match SSA records. If they don’t, you’re likely to get a letter from the IRS about the mismatch. And if you expect a refund, this may delay when you’ll get it.
Be sure to contact SSA if:
File Form SS-5, Application for a Social Security Card, with the SSA to let them know about a name change. You can get the form on SSA.gov by calling 800-772-1213 or at an SSA office.
You can file Form SS-5 at an SSA office or by mail. Your new card will have the same SSN as before but will show your new name.
If you have an adopted child who does not have a SSN, use a temporary Adoption Taxpayer Identification Number on your tax form. You can apply for an ATIN by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions, with the IRS. Get the form on IRS.gov or by calling 800-TAX-FORM (800-829-3676).
The IRS works constantly to improve income reporting by taxpayers. One tool they employ is requiring businesses to file "information returns" that tell the IRS about amounts the business paid out that should be reported by the recipients as income.
Probably the most familiar of these information returns is the Form W-2 which reports wages paid to employees. Another information return is Form 1099, which is actually a group of more than a dozen different forms that report other types of income to the IRS.
Recently the IRS ramped up its compliance efforts by asking businesses to answer questions about their 1099 filings when they file their income tax returns. This added IRS scrutiny, coupled with steep noncompliance penalties, make it important for every business to check their 1099 filing requirements each year.
Here's what you need to know about Form 1099 and the filing requirements your business may have.
According to IRS rules, every person engaged in a trade or business, including nonprofit organizations, must file 1099 forms for certain payments made during the year in the course of the payer's trade or business. Here are some of the most common forms and their filing requirements.
Form 1099-MISC is the form most frequently used by small businesses to report a wide variety of payments, and it is probably the 1099 that causes the most confusion. Here's what you need to know.
A Form 1099-MISC is used to report payments for services provided to your business by unincorporated vendors when those payments total $600 or more for the year. Typical payments include rents, royalties, and compensation to independent contractors, such as consultants, web designers, accountants, lawyers, and cleaning services.
The IRS has set out five conditions for payments that must be reported using Form 1099-MISC. All of the following five conditions must be met:
January 31 – One copy of the Form 1099 must be given to the recipient of the payment by this date of the year following payment.
February 28 – One copy of the Form 1099 must be sent to the IRS by this date of the following year unless the filing is done electronically.
March 31 – If filing is done electronically, this is the deadline for providing the IRS copy.
NOTE: Though all businesses are encouraged to file electronically, it is required for businesses filing 250 or more returns.
The penalties for failing to file Forms 1099 range from $30 to $100 per form, depending on how late your filing is and whether or not the failure to file was intentional. Total penalties can go as high as $500,000 for businesses with gross receipts under $5 million or $1.5 million for those with gross receipts over $5 million.
The IRS has increased its scrutiny of 1099 filings. In its efforts to increase 1099 filing compliance, it now asks the following two questions on business tax returns:
Clergy Housing Exclusion Ruling
On Friday, November 22, a federal judge ruled a portion of the clergy housing allowance to be unconstitutional. The case, brought about by the Freedom From Religion Foundation (FFRF) declared the tax exemption that ministers receive is unconstitutional because it provides financial benefit based on religion. The ruling applies only to ministers who receive a cash allowance for housing-related expenses. The challenge regarding exemption for ministers who live in employer-provided housing (church-provided parsonage) was dismissed.
This is only a district court decision that does not affect the current law, nevertheless, it is something that should be followed closely over the next year.
We will continue to monitor this evolving issue and update you with new developments. For more detailed information please follow the link to the Evangelical Council Financial Association (ECFA) full article… Click here