January 9, 2013
3 EXTREMELY IMPORTANT ITEMS FOR TAX RETURNS
1. If you accept credit cards as payments in your business, you will be receiving a new form (Form 1099-K) from your credit card settlement companies. This form will show the amount of credit card sales for the year, and the number must be separately identified on your Tax Return.
2. The IRS has stiffened the penalties for failure to file 1099’s. The penalty has gone from $50 per omission to $500 per omission (250 x 2). 1099’s are required for business payments totaling $600 to individuals, partnerships, and most LLC’s. The $600 threshold is not per payment but is an accumulation of payments made throughout the year. You should have anyone who qualifies for a 1099 complete Form W-9 which will verify their tax information. What also adds teeth to this penalty is that every business Income Tax Return will have two (yes/no) questions related to whether your business made payments that would require 1099’s and whether or not you prepared them.
3. PA to also require 1099’s beginning for year 2012. Copies of Forms 1099 must also be sent to the PA Department of Revenue. The penalties for failure to file are the same as the IRS penalty, so it effectively doubles it.
Remember, the penalty is on the giver (payer) of the 1099, not the recipient.
Since tax rates did not increase this year, this increased compliance penalty is an easy way for the government to raise revenue. All they need to do is request your disbursements and run the totals. I am attaching Form W-9, which can be copied and completed by any individuals, partnerships, and certain LLC’s which would qualify for a Form 1099.
