1099 Deadlines, Penalties & State Filing Requirements for 2017

1099 Deadlines

As the end of January approaches, it is important for all the employers to prepare and issue 1099s to the recipients, and file them to IRS responsibly without any delay.

1099 tax form, referred to as “Information Returns,” should be send by the company to the independent contractors if it paid more than $600 to them in 2016. Since there are many types of 1099 forms, the common forms are 1099-MISC, 1099-INT, 1099-S, 1099-C, 1099 B, 1099-R and 1099-DIV.

It’s important for the employers to prepare and file the appropriate 1099s to the IRS before deadline otherwise heavy penalties for late submissions or wrong information will be imposed. The following table will help you to remember all the dates for sending tax forms to the contractors and for paper filing or e-filing them with the IRS.

1099 Deadlines for 2017

Form Due to Recipient Filing to IRS By Mail E-filing to IRS
1099-MISC Jan 31, 2017 February 28, 2017 Mar 31, 2017
1099-B
1099-S
1099-MISC boxes 8 or 14
Feb 16, 2017 February 28, 2017 Mar 31, 2017

1099 deadines

Penalties for Late Filing

The penalties range from $50-$530 per missed 1099 tax form, depending on how late the forms were submitted.

Penalty per Form Length of Delay
$50 More than 30 days late
$100 More than 30 days late but before August 1st, 2017
$260 Filing on or after August 1st, 2017
$530 Intentionally neglecting to file

The maximum penalty is a total of $1,064,000* for small businesses. In all cases, the IRS considers you to be a small business if you’ve earned an average of $5 million or less in annual revenue for the past three tax years.

New State Filing Requirements

Combined State/Federal Program for 1099-series

Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Georgia, Hawaii, Idaho, Indiana, Kansas, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, South Carolina, Vermont, Virginia, Wisconsin.

States with no 1099-MISC filing requirement:

Alaska, Florida, Illinois, Nevada, New Hampshire, North Carolina, New York, South Dakota, Tennessee, Texas, Washington, Wyoming

States that require 1099-MISC filing, if you withheld:

Kentucky, Rhode Island, Utah, West Virginia

States that require a separate 1099-MISC filing or are unclear on their filing requirements:

Iowa, Massachusetts, Oklahoma, Oregon, Pennsylvania, Washington DC

We hope you will be feeling prepared, informed, and ready to file your 1099s. CheckMark’s 1099 tax software will help you in filing 1099s just like a breeze.  You can have 1099 Print or 1099 E-file version depending on your requirement i.e. if you are filing 250 or more information returns for the calendar year, then e-fling is a must. Else, you can paper file and mail to IRS for less than 250 information returns.

If you have any questions about the 1099 filing, you can reach us at any time. We’d be happy to help you out.

Form W2: Everything You Ever Wanted To Know

form w2

Image Credit: Flickr

Form W2 is a multi-part standard tax form that an employer must send to the employees as well as Internal Revenue Service (IRS) at year end. The form contains employee’s annual wages, Social Security earnings, Medicare earnings, and federal and state taxes withheld from the employee’s paycheck.

Employers should also submit W-3 forms to SSA along with W-2 forms summarizing all the information provided in the W-2 forms of all employees. Both the forms should have same and accurate information regarding total earnings, Social Security wages, Medicare wages and withholding for all employees for the previous year.

As an employer, you should prepare 6 copies of each W2 form per employee. All the six copies should be prepared and are equally important. The following table shows the exact departments, where the W-2 form should be send:

Copy A (Red Colored Form) –– Social Security Administration
Copy 1 –– City, state or locality
Copy B –– Filing the employee’s federal tax return
Copy C –– Employee’s records
Copy 2 –– City, state, or locality
Copy D –– Employer’s records

Employers should prepare W-2 forms and send them to their employees. Ensure you keep the Copy A i.e. red colored form.

Deadline Dates To File W-2s

Jan 31, 2017 Deadline to distribute Forms W-2 to employee
Feb 28, 2017 Deadline to file using paper Forms W-2
Mar 31, 2017 Deadline to file using Business Services Online

How to Submit W-2 Forms?

  1. Employers should prepare W-2 forms and send them to their employees. Ensure you keep the Copy A i.e. red colored form.
  2. Submit W-2 and W-3 form to Social Security Administration (SSA).
  3. Make sure you include all the copies of W-2 forms along with the W-3 form.
  4. Send all the forms to the following SSA address:
U. S. Postal Service

Social Security Administration
Data Operations Center
Wilkes-Barre, PA 18769-0001

 

Private Delivery Service (FedEx, UPS, etc.)

Social Security Administration
Data Operations Center
Attn: W-2 Process
1150 E. Mountain Drive
Wilkes-Barre, PA 18702-7997

* For Certified Mail, use ZIP code 18769-0002

  1. You can even e-file W-2 and W-3 forms online, directly to the Social Security Administration using CheckMark software. However, while e-filing W-2 forms, you may not need to submit W-3 forms because SSA automatically calculates the total from the submitted W-2 forms.

 Necessary Precautions

Before filing the forms, ensure all the company and employee information i.e. TINs, names, and money amounts are same and exact on both the forms. The total no. of W-2 forms should be precisely included in the W-3 forms. You have to submit the original red colored form to the SSA otherwise, they won’t accept photocopies.


 SSA Penalties for Late Submission

In case if you are late in submitting Form W-2, then you will be subjected to late filing penalties. Generally, the penalty is based upon the time delayed in filing and size of your business as well. However, if you intentionally delayed the filing, then the minimum penalty of $100 per form will be imposed. In case if you correctly filed the returns within the 30 days of due date, then the lowest penalty amount is $15.


 How to Correct an Error on Your W-2

If you make an error in the forms, then the period of one month before filing to SSA will be helpful for you to correct and rectify the mistake. If you have noticed the error after the submission to SSA, then you have to resubmit the corrected forms before the due date.


 Common Errors in Completing Form W-2

Always review and cross-check all the information on W-2 and W-3 Forms before submitting to the Social Security Administration so that you didn’t have to waste your precious time unnecessarily. However, the following are the common W-2 and W-3 form errors.

  • Missing the SSA deadlines
  • Submitting the form of the wrong year
  • Using unapproved forms (Always use IRS-approved forms)
  • Submitting W-2 forms without including W-3 Forms
  • Submitting only W-3 Forms to SSA
  • Dissimilar information on W-2 and W-3 Forms

 The Following is a Sample of Filled W-2 Form:

Understanding Various Boxes found on Form W-2

W-2 Tax Form – First Set

Box A: Employee’s Social Security Number: Fill the employee’s SSN number correctly in this box. If there is any error in the SSN number, then the employee should immediately report the mistake to the concerned department i.e. HR or tax or payroll department. They will correct and issue a new Form W-2 to the employee. If the employee failed to rectify the mistake, then the error will definitely slow the processing of their return.

Box B: Employer Identification Number (EIN): This box is for entering employer’s unique tax identification number.

Box C: Employer’s Information:  The box is to fill the employer’s name, address, city, state, and zip code. The address should be of company’s headquarters or actual workplace rather than the employer’s local or personal address.

Box D: Control Number: A control number is an internal number or code developed by the employer or company’s payroll department, which identifies this unique Form W2 document in their records. If the company didn’t assign any box number to the employee, then the box (d) should be left blank.

Box E: Employee’s Name:  This box should be filled with employee’s complete name i.e. first name, middle initial and last name. Additionally, it is important to note that the name should be same as mentioned in the employee’s Social Security card. If there is a mistake in the form, then the employee should report the matter to the concerned department so that they re-issue a new Form W-2 with the correct name. The employee should also provide photocopy of his or her Social Security card to the respective department so that they can update their records with the new name.

Box F: Employee’s Address: This box identifies the address, city, state, and zip code of the employee. Ensure it is correct and accurate because the employee’s refund might be posted to a different address. In case the address is incorrect, then the employee should immediately notify the HR department so that they can update their records with the employee’s new address.


W-2 Tax Form – Second Set

Box 1 – Wages, Tips, and Other Compensation: This box identifies total taxable wages or salary for the federal income tax purposes, which includes wages, salary, tips, bonuses, prizes, commissions, severance or dismissal pay, vacation pay and fringe benefits. The employee should not include any payroll deductions or pre-tax benefits such as savings contributions to a 401(k) plan, 403(b) plan, medical or dependent care reimbursement plan, dental and health insurance.

Box 2 – Federal Income Tax Withheld: This box identifies the total amount of federal income tax withheld from the employee’s pay based on their W-4 filings. If they do not file the W-4 yet, then the default will be “single and 0” regardless of their marital status.

Box 3 – Social Security Wages:  SSW is the total amount of wages subject to the Social Security tax. The Social Security tax in 2016 is assessed on wages up to $118,500, which is called Social Security wage base. If the amount is above the wage base, then the employees need to report to their employer to correct the W-2 forms.

Box 4 – Social Security Tax Withheld: This box shows the total amount of Social Security taxes withheld from employee’s pay. The Social Security tax is a flat tax rate of 6.2% on employee’s wage income, up to a maximum wage base of $118,500 (for 2016). The maximum yearly Society Security tax withholding amount in 2016 is $7,347.

Box 5 – Medicare Wages and Tips: This box shows the total amount of wages and tips, which are subjected to the Medicare taxes. Medicare wages includes any deferred compensation, 401(k) contributions, or other fringe benefits that are excluded from the federal income tax. Remember, there is no maximum wage base for Medicare taxes.

Box 6 – Medicare Tax Withheld: This box shows the amount of taxes withheld from employee’s pay for the Medicare tax, which is nothing but the flat tax rate of 1.45% on your total Medicare wage under $200,000. The Medicare wage percentile for self-employed is 2.9%.  However, due to Obamacare policy, employees are subjected to withhold Additional Medicare Tax at a rate of 0.9%.

Box 7 – Social Security Tips: This box shows the total amount of tips an employee has reported to the employer and subjected to social security tax.

Box 8 – Allocated Tips: Allocated tips are defined as the tips allocated by none other than the employer. This is not included in boxes 1,3,5, or 7.

Box 9 – Advance EIC Payments: This box is no being longer used because the reporting requirement’s i.e. advance of the earned income credit expired a few years. For some reason, it is not yet removed from the form but it is shaded so that the employees don’t get confused.

Box 10 – Dependent Care Benefits: This box reports the amount, which is reimbursed for dependent care expenses through a flexible spending account or the dollar value of dependent care services provided by the employer. If the amount is under $5,000, then it is considered as non-taxable benefits. However, if the amount reported is well over $5,000, then it is considered and reported as taxable wages in Boxes 1, 3, and 5.

Box 11 – Nonqualified Plans: This box reports either of the two amounts i.e.

  1. Amount distributed to the employee from employer’s non-qualified deferred compensation plan
  2. Amount distributed to the employee from employer’s non-government Section 457 pension plan

However, this amount is already included as taxable wages in Box 1.

Box 12 – Deferred Compensation and Other Compensation: In this box, several types of compensation and benefits are reported. The box reports a single letter or double letter code followed by a dollar amount. The following table helps you understand the codes easily, as the definitions are directly fetched from IRS website:

Code Explanation
Code AA Designated Roth contributions under a section 401(k) plan
Code A Uncollected social security or RRTA tax on tips
Code BB Designated Roth contributions under a section 403(b) plan
Code B Uncollected Medicare tax on tips
Code C Taxable cost of group-term life insurance over $50,000
Code DD Cost of employer-sponsored health coverage
Code D Elective deferrals under section 401(k) cash or deferred arrangement (plan)
Code EE Designated Roth contributions under a governmental section 457(b) plan
Code E Elective deferrals under a section 403(b) salary reduction agreement
Code F Elective deferrals under a section 408(k)(6) salary reduction SEP
Code G Elective deferrals and employer contributions (including nonelective deferrals) to any governmental or nongovernmental section 457(b) deferred compensation plan
Code H Elective deferrals under section 501(c)(18)(D) tax-exempt organization plan
Code J Nontaxable sick pay
Code K 20% excise tax on excess golden parachute payments
Code L Substantiated employee business expense reimbursements
Code M Uncollected social security or RRTA tax on taxable cost of group-term life insurance over $50,000 (for former employees)
Code N Uncollected Medicare tax on taxable cost of group-term life insurance over $50,000 (for former employees)
Code P Excludable moving expense reimbursements paid directly to employee
Code Q Nontaxable combat pay
Code R Employer contributions to an Archer MSA
Code S Employee salary reduction contributions under a section 408(p) SIMPLE plan
Code T Adoption benefits
Code V Income from the exercise of nonstatutory stock option(s)
Code W Employer contributions to a health savings account (HSA)
Code Y Deferrals under a section 409A nonqualified deferred compensation plan
Code Z Income under section 409A on a nonqualified deferred compensation plan

Box 13 – Check the Box: The three check boxes should be checked by the employer if the employee:

  1. is a statutory employee
  2. have participated in some retirement plan
  3. have received the third party sick pay

Box 14 – Other Tax Information: The employer needs to report any information that didn’t fit anywhere else in the form such as state disability insurance taxes withheld, union dues, after-tax contributions to a retirement plan, employer-paid tuition assistance, health insurance premiums deducted and nontaxable income.


Form W2 – Third Set

Box 15: State and State Employer’s Identification: This box is pretty straightforward, as it reports the employer’s state and state tax identification number. In case if the employee works in a state without a reporting requirement, then the employee should leave it blank along with other boxes i.e. box 16 and box 17. In addition, if the employee has several withholdings in a number of states, then the employee should fill more than one box provided in the box 25.

Box 16: State Wages: This box represents the total amount of employee’s taxable wages i.e. wages, tips, and compensation earned in that state. If the employee is subjected to the state income taxes, then the box 16 will represent the total amount of taxable wages for state tax purposes. If the employee lives and works in a state that doesn’t impose an income tax, then the employee should leave this box blank.

Box 17: State Income Tax Withheld: The box reports the total amount of state income taxes withheld from the employee’s paychecks for the wages reported in Box 16.

Box 18: Local wages: If the employee is subjected to local, city, or other state income taxes, then the total amount of taxes withheld from the employee’s paycheck for local income taxes should be reported in this box.

Box 19: Local income tax withheld: If the employee has reported wages regarding local income tax in the box 18, then the employee should report the withholding in the box 19.

Box 20: Locality name: The box 20 represents the name of the particular local, city, or other state tax being reported at box 19.


We hope the following guide solved your concerns related to form W2. If you have any further question, please feel free to comment below.

2016 Rules for Tax Expensing and Depreciation

Tax Expensing and Depreciation

Capitalization of costs is the usual practice that any business has to follow when they buy an asset which is supposed to render service for more than a year (usually for fixed assets). In simple terms, that means the cost of the asset is written off in the balance sheet over a number of years. There are rules and laws of depreciation & amortization in place on how to do this actually and it depends on the type of asset acquired.

Capitalization rules are universal and apply to every asset that incurred a cost to the company even if the cost is meager. But there are rules by which you can accelerate the write-off process for each and every asset that is purchased.

Section 179 Deduction

As per this rule, instead of applying depreciation allowances spread over five years or more now you can deduct the cost of the asset (machinery/equipment) in the same year you buy them. For this expensing rule (Section 179 deduction) the dollar limit is set to $500,000 for the year 2015 and 2016. Taking inflation factor into consideration the dollar limit can go up for 2017.

Expensing rule (Section 179 deduction) will prove to be beneficial for businesses that are profitable for the accounting year and it applies to both new and pre-owned purchases. This also means that expensing rule shouldn’t be used to create or increase the net operating loss of the business for the accounting year. Apart from office machinery, laptops, cell phones, furniture the expensing rule can be applied to the purchase of –

  • Packaged software bought in the year 2015.
  • Put to service after 2015, Air conditioning and heating units and other office utilities.

Bonus Depreciation

Apart from Expensing rule (Section 179 Deduction), Bonus Depreciation is another tax write-off method available.

It is a method to accelerate the rate of depreciation deduction. It states that 50 percent of the cost of the item can be deducted for the year when the item is put to service. The 50 percent ceiling applies for the year 2015, 2016 and 2017. For the year 2018, the ceiling goes down to 40 percent and further goes down to 30 percent for the year 2019. It is said that this rule will expire by 2019.

Unlike Expensing rule (Section 179 Deduction) which can be applied to both new and pre-owned purchases, Bonus Depreciation applies to only new purchases only.  That said Bonus depreciation for the year 2015 was to be applied for all the machinery, office equipment, and buying of qualified leasehold improvements. Restaurants and Retail property improvement doesn’t qualify for Bonus depreciation method as per the rule. From 2016, Bonus Depreciation can be applied to all qualified improvements made to the commercial premise.

For a fairly expensive item, Bonus Depreciation can be combined with Section 179 along with regular depreciation rules. This means that for highly expensive item purchase you would be able to write-off most of the cost upfront.

You may find more info about various tax write-off methods here: IRS Publication 946, How to Depreciate Property.

De Minimis Safe Harbor

Safe Harbor is another method wherein you instead of using expensing and depreciation methods to write-off, you treat the asset purchasing as material and supplies. In this method, you can deduct the cost of the acquisitions immediately but you cannot add them to the balance sheet.

The safe harbor method for 2015 is limited to $500 per purchase or invoice. For the year 2016, the limit is increased to $2,500 per item purchase.

For to use the Safe harbor method, you need to first attach an election statement with your return. An election has to be clearly made each year stating that you would like to use this method.

Bottom Line

You have various methods available at your disposal to write-off expenses of your business related purchases. Also, the method with which you pay for the expenses does not impact your tax write-offs. That is, purchasing using a credit card or cash the capitalization write-offs starts when you bought it and not on how you bought it.

Plan Your Taxes With Certainty

taxes

With the Protecting Americans from Tax Hikes (PATH) Act of 2016 from Congress, small businesses will experience some relief regarding tax rules and their fluctuations. This PATH Act is applicable for taxes of 2015 and 2016.

Taxes for 2015

The new liberal tax rules are applicable for 2015 and they are the same which were applicable back in 2014. That is, if eligible you may write off the cost of equipment, in service which is up to $500,000. For accounting and tax purposes you may depreciate additional $8,000 for the new vehicle bought in 2015 for the reason of bonus depreciation.

Permanent Changes

Many of the tax rules have been dealt with expirations and subsequent extensions in their applicability. Yet many of those have become permanent. Some of them are illustrated below –

  • Under Sec. 179 a limit of $500,000 on the business property expenses can be used for inflation deductions from the year 2015 and filing in 2016.
  • Small businesses can now use the credit against Social Security taxes and not against income taxes.
  • The recovery period for leasehold, retail improvements, and restaurants has been made 15-years.
  • Active duty employees will get wage differential payments.
  • S corporation period for built-in gains is reduced.
  • Free parking and mass transit passes are deemed equal. The benefits are not subject to any income and employment taxes and results in tax benefits for employee and employer both.
  • Food inventory donations are applicable for charitable contribution deductions.
  • Appreciation in the property value of S corporation which it donates is considered in basis adjustment of the corporation’s shareholders.

Temporary Tax Law Extensions

Since some of the temporary extensions in tax laws stay for more than a year, it gives a better perception on the tax planning for the coming year. Some of the tax rule extensions which were primarily temporary –

  • Work opportunity tax credit (WOTC) has been extended through 2019. A new category of targeted workers (qualified long-term unemployment recipients) has been introduced and by definition stands for long-term unemployed individuals who has remained unemployed for 27 weeks or more.
  • Bonus depreciation by 50% extended through 2019. All Businesses are eligible to depreciate 50 percent for the equipment cost which was used for service in 2015, 2016 and 2017. Bonus depreciation will be phased out by 40% in 2018 and by 305 in 2019.

For 2016 Extensions include:

  • Applicable deductions for energy-efficient commercial buildings.
  • First $15 million expensing of qualifying film and television programs cost.
  • Empowerment zone (EZ) incentives are extended till 2016.
  • Credit limit for energy-efficient home manufacturers.
  • Race horses categorization as three-year property.
  • Recovery period for depreciation of motorsports entertainment complexes is 7-years.
  • Tax-credits for various energy-related business operations.

PATH (Protecting Americans from Tax Hikes) Act: New Rules

Old tax rules extended and taken in as part of PATH. Here is a scenario:

  • Applies to the safeguarding against penalties for errors on information and payee statements. Error in information return for $100 or less, the issuer does not have to do anything. These rules are applicable to returns and statements that are supposed to be filed after December 31, 2016.
  • The dates for filing the taxes relating to employee wages and nonemployee compensation. That said, the due date for returns and statements is on or before January 31 for the last accounting year. This means copies of W-2s and 1099s should reach the social security administration and IRS by the date mentioned above.

It All Boils Down To…

Congress wants to enact comprehensive tax reform in 2016, but the permanency of favorable tax rules has given an ambiguous hue to the tax rules in total. With the implementation of the comprehensive tax reforms, some of the permanent provisions will be modified.

PATH tax act would ensure greater tax savings for the businesses. It is advisable to meet a tax advisor and explore the rules in details to know what all is beneficial for your business.

That would also include considering individual tax rules and regulations that play a major part in personal tax filing.

As a small business owner, you can be rest assured that the recording and filing of your accounting, tax filings along with necessary W-2s and 1099s will be taken care of timely with CheckMark’s MultiLedger – our integrated accounting software geared for small and medium-sized businesses in the USA.