All Posts by Mike Jesowshek, CPA

I Didn’t File My Tax Return; Now What?

By Mike Jesowshek, CPA | Deadlines or Notices , Taxes

There are a lot of perfectly reasonable reasons for not having filed your income taxes. Many people who fail to file are new to the job market, and never having filed before may simply have been unaware of the requirement to do so. Some people know but are too overwhelmed with other life events, including illnesses, death, or job loss. Whatever your reason and whether you’ve only missed one year of filing or several, there comes a point when you either remember on your own or are prompted for a request for a copy. Now, what do you do? And how much trouble are you in?

Here’s the Good News

First of all, if you’re the one who realized that you haven’t filed rather than getting a notice from the IRS or your state tax authority, then you’re probably not in too much trouble. Even if you’ve gotten a notice, there’s a specific legal process that gets followed when a taxpayer hasn’t filed a return, and it is a perfectly reasonable procedure that can be addressed and managed. There is no reason to panic, as nobody is going to break down your door and haul you away. Filing taxes is a matter of paperwork and payment. If you haven’t been in compliance, you simply need to amend the situation and pay some penalties, and possibly some interest.

As A Matter of Fact …

You may not even have been required to file a return.

There are plenty of taxpayers whose circumstances are such that they aren’t required to file a tax return, and when that’s the case, the state frequently follows their lead (which is a good thing, as many times the penalties that a state charges for failure to file tax returns are higher than those imposed by the federal government.)

The best and easiest way to find out whether you are one of those who didn’t need to file is to visit the IRS website, where there is a handy tool called “DO I NEED TO FILE A TAX RETURN?” Plug in your relevant information about the tax year in question, your income, household composition and filing status for a quick answer. You may be in for a pleasant surprise unless you fall into one (or more) of the following categories:

• You earned at least $400 in profit from being self-employed. This can include any job for which you received a 1099, and anything from doing freelance work as a writer to providing landscaping services for your neighbors. Driving for Lyft or Uber counts too.
• You sold your house, even if it was a break even or loss and you had no income that year
• You received unemployment benefits
• You are a worker who earns tips and they weren’t reported to your employer. Even if you reported them you may have to file a tax return if they didn’t submit payroll taxes for them.

In each of these situations, you are required to file a tax return, regardless of how much or how little you earned and whether you paid taxes on those earnings or not.

Fortunately, filing a tax return is always possible, though you may have to pay a penalty.  On the flip side, you may actually have a refund coming which obviously will benefit you to file.

Did the Government Do It For You?

Though the IRS doesn’t always catch every time that a taxpayer fails to file a tax return, when they do they will send out a notice. And if your Social Security Number was linked to any type of document or paperwork that they received, whether that’s a W-2, a 1099 or any other type of form, they also probably filed a substitute tax return to make up for your oversight. These substitute returns represent a bare minimum of information. They don’t enter any of the information that you might have provided in order to minimize your tax liability – they use the standard deduction and personal exemption, then record the income information that they have. It’s also what they’ll use to figure out your penalties, interest, and fines owed.

There are a lot of reasons why you should take action to get a real tax return in for yourself instead of the substitute return that the government provided, but one of the best reasons is that when you’re asked for a previous year’s tax return so you can take out a loan, the substitute won’t satisfy the lender’s requirements.

Better Late Than Never, But It Has to be Right

When you’re filing a past-due tax return, you want to make sure that every “t” is crossed and every “I” is dotted. This is no time for making mistakes or leaving out important information. Even if your returns are generally simple, you’d be wise to work with an experienced tax professional in getting your papers turned in to the federal and state authorities. They will look out for your best interest, helping you to avoid any potential pitfalls and acting on your behalf to address complex questions and offering authoritative explanations of your inaction if necessary.  In some circumstances a tax professional can even get your penalties abated or minimized.

Avoiding an IRS Audit as a Fitness Studio Owner

By Mike Jesowshek, CPA | Taxes , Uncategorized

Can’t Pay Your Taxes by the April Due Date?

By Mike Jesowshek, CPA | Deadlines or Notices , Taxes

If you aren’t one of those lucky Americans who gets a tax refund from the IRS you might be wondering about your options for paying off your tax liability by the April due date.

The IRS encourages taxpayers to pay the full amount of their tax liability on time, and it imposes significant penalties and interest on late payments. Thus, if you are unable to pay the taxes that you owe, it is generally in your best interest to make other arrangements to obtain the full funds to pay your taxes so that you are not subjected to the government’s penalties and interest. Here are a few options to consider.

• Family Loan – Obtaining a loan from a relative or friend may be the best bet because this type of loan is generally the least costly in terms of interest.
• Credit Card – Another option is to pay by credit card by using one of the service providers that works with the IRS. However, as the IRS will not pay the credit card processig fee, you will have to pay that fee. You will also have to pay the credit card interest on the payment. Caution: Depending on the amount owed, it may be less expensive just to pay the IRS penalties and interest rate on the unpaid balance rather than the normally higher credit card interest rates.
• Installment Agreement – If you owe the IRS $50,000 or less, you may qualify for a streamlined installment agreement that allows you to make monthly payments for up to six years. You will still be subject to the late payment penalty, but it will be reduced by half. In addition, interest will also be charged at the current rate, and you will have to pay a user fee to set up the payment plan. By signing this agreement, you agree to keep all future years’ tax obligations current. If you do not make payments on time or if you have an outstanding past-due amount in a future year, you will be in default of the agreement, and the IRS will then have the option of taking enforcement actions to collect the entire amount that you owe. If you seek an installment agreements exceeding $50,000, the IRS will need to validate your financial condition and your need for an installment agreement through the information you provide in the Collection Information Statement (in which you list your financial statements). You may also pay down your balance to $50,000 or less so as to take advantage of the streamlined option.
• Tap a Retirement Account – This is possibly the worst option for obtaining funds to pay your taxes because it jeopardizes your retirement and because the distributions are generally taxable at the highest bracket, which adds more taxes to the existing problem. In addition, if you are under age 59½, such a withdrawal is also subject to a 10% early-withdrawal penalty that compounds the problem even further.

Whatever you decide, don’t just ignore your tax liability, as that is the worst thing you can do. If you are a business owner getting nailed with self-employment taxes yet again this year, contact us immediately so we can discuss how we can implement a system NOW to avoid that in 2018.

Cryptocurrencies and Taxes

By Mike Jesowshek, CPA | Taxes

As our world has become more and more “digital,” it was only a matter of time before cryptocurrencies were developed. One of the first of these virtual currencies was Bitcoin, and the Bitcoin network came online in 2009. Since then, additional cryptocurrencies have been developed.

Cryptocurrencies are generally utilized for transactions by tech-savvy individuals and have a comparable value in real currency or take the place of real currency. These virtual currencies can be purchased with or exchanged into U.S. dollars, euros, and other real or virtual currencies.

Valuation – The value of a virtual currency is based upon market value, i.e., what a willing buyer will pay a willing seller – much like trading in stocks. On February 15, 2018, when this article was written and according to Oanda (an online currency converter), a Bitcoin, one of the more popular virtual currencies, was worth $9,025, and one was worth $995 one year earlier.

It took several years for the IRS to come up with guidance on how to deal to transactions involving virtual currencies. It finally issued Notice 2014-21 determining that virtual currency is treated as property and that the general tax principles applicable to property transactions apply to transactions using virtual currency. This can best be illustrated by example.

Character of the Gain or Loss – The character of the gain or loss generally depends on whether the virtual currency is a capital asset in the hands of the taxpayer. A taxpayer generally realizes capital gain or loss on the sale or exchange of virtual currency that is held as a capital asset. For example, stocks, bonds, and other investment property are generally capital assets. A taxpayer generally realizes ordinary gain or loss on the sale or exchange of virtual currency that he or she does not hold as a capital asset. Inventory and other property held mainly for sale to customers in a trade or business are examples of property that is not a capital asset.

Foreign Currency Transactions – Under currently applicable law, virtual currency is not treated as currency that could generate foreign currency gain or loss for U.S. federal tax purposes.

Foreign Bank and Financial Account (FBAR) Reporting – The IRS has stated a few years ago that virtual currency transactions need not be reported for purposes of Foreign Bank and Financial Account (FBAR) reporting. But the IRS cautioned that its position could change in the future. However, the IRS has not issued any announcements regarding a change in its position on FBAR filings for years through 2017.

Payment for Goods & Services – A taxpayer subject to U.S. taxation who receives virtual currency as payment for goods or services must, in computing gross business income, include the fair market value of the virtual currency, measured in U.S. dollars, as of the date that the virtual currency was received.

Acquiring Virtual Currency – One can go to online exchanges and purchase virtual currency. But care should be taken to make sure the exchange is reputable. Once you have the virtual currency in your online wallet, you are free to spend it with anyone who accepts that form of currency.

Virtual Currency Mining – Mining is a term used to describe how cryptographic information distributed within a virtual currency network is secured, authorized, and approved. In essence, it is the processing of payments that have taken place once they occur. It takes the place of banks, merchants’ accounts, and clearing houses like Visa. It essentially eliminates all of the third parties’ cuts of income from the transaction. It involves complex mathematical logarithms that need to be solved, and the mining process completes this task autonomously. For individuals who mine virtual currency, it is a trade or business, and they are subject to self-employment tax.

Apparently, virtual currency miners are also subject to Form 1099-K filing requirements if their transactions rise to the reporting threshold. In general, a third party that contracts with a substantial number of unrelated merchants to settle payments between the merchants and their customers is a third-party settlement organization (TPSO). A TPSO is required to report payments made to a merchant on a Form 1099-K, Payment Card and Third-Party Network Transactions. If, for the calendar year, both (1) the number of transactions settled for the merchant exceeds 200 and (2) the gross amount of payments made to the merchant exceeds $20,000, then 1099-K filing is required.

Employee Payments – If an employee is paid in virtual currency, then the fair market value of the virtual currency, measured in U.S. dollars, paid as wages is subject to federal income tax withholding, Federal Insurance Contributions Act (FICA) tax (Social Security and Medicare A), and Federal Unemployment Tax Act (FUTA) tax and must be reported on Form W-2, Wage and Tax Statement. The U.S. government doesn’t accept virtual currency for tax payments.

Independent Contractor Payments – The fair market value of virtual currency received for services performed as an independent contractor, measured in U.S. dollars as of the date of receipt, constitutes self-employment income to the independent contractor and is subject to the self-employment tax. Payments are subject to the normal 1099-MISC reporting requirement when the payments for the year measured in U.S. dollars are $600 or more.

IRS Enforcement Actions – Because fewer than 900 taxpayers reported virtual currency gains and losses each year on their tax returns from 2013 to 2015, the IRS is stepping up enforcement of the rules. Recently, the IRS won a court’s approval for a summons to obtain account and transaction information on more than 14,000 customers from Coinbase, a company that services buyers and sellers of Bitcoins. Based on the success in the Coinbase case, the IRS will likely expand its efforts to obtain information about cryptocurrency account owners from other companies dealing in Bitcoins and similar virtual currencies.

Also, beginning with 2018 returns, Sec. 1031 tax-deferred exchanges will only apply to real property; thus, investors in virtual currency who trade one type of virtual currency for another will be required to report their capital gains/losses and won’t be able to use the 1031 tax-deferral rules.

Trainers: Independent Contractors or Employees?

By Mike Jesowshek, CPA | General Business , Payroll , Taxes

Learn more about independent contractors versus employees specifically related to fitness studios and gyms by clicking the link below for an article posted on the Association of Fitness Studio’s blog.

Independent Contractor or Employee – How to Pay Them Correctly

Business Owners Beware – Entertainment Expenses Limited

By Mike Jesowshek, CPA | Taxes

If you are a business owner who is accustomed to treating clients to sporting events, golf getaways, concerts and the like, we have some bad news for you. The GOP’s tax-reform bill that President Trump signed on December 22nd of last year eliminated the business-related deduction for entertainment, amusement or recreation expenses, effective beginning in 2018.

This doesn’t mean you can’t still entertain your clients; it just means you can no longer deduct 50% of the cost of that entertainment as a business expense, making it more costly for you to entertain clients.

But all is not lost! The Act does retain a deduction for business meals that are directly related to or associated with the active conduct of your business. The term “directly related” means that actual business discussions were conducted during the meal and you anticipated a specific business benefit from the meal. The term “associated with” is more liberal and includes meals either preceding or following a bona fide business discussion. In either case, the business deduction continues to be 50% of the actual expense. Also remember that business meals must be documented, including the amount, business purpose, date, time, place and names of the guests as well as their business relationship with you.

That’s not all! In the past, employers have been accustomed to deducting 100% of the cost of food and beverages provided to employees at or near the place of business. That too has changed, and the Act now subjects food and beverages supplied to employees to the 50% limitation. But that deduction is only allowed through 2025. As of 2026, employers’ costs for food and beverages furnished to employees will not be deductible.

Meals while traveling out of town on business continue to be deductible and are also subject to the 50% limitation.

As more information/clarification from the IRS becomes available regarding this change, we will continue to update you so please stay in touch. We just wanted to get this initial information out to you!

Tax Reform Central: Find Everything About the Tax Cuts and Jobs Act

By Mike Jesowshek, CPA | Taxes

After over 30 years of little changes to the tax code, the “Tax Cuts and Jobs Act” (H.R. 1) delivered a major change to the law for 2018. The changes affect both individuals and business owners, so careful planning and analysis are needed to make the right financial choices. We have compiled the best coverage of the tax reform issues below. This is just the start and our initial reactions.  Stay posted as we learn more and more about this tax law throughout the year.

Business Issues
What Does Tax Reform Mean to Business Owners? – 1/30/2018

Now that tax reform is a reality, business owners of all shapes and sizes need to review their business structure and the possible tax ramifications. This article reviews the different possibilities for pass-through entities. These are complicated calculations and expert advice is highly recommended.

Medical
Medical Deductions; The New Tax Law – 1/23/2018

The Tax Cuts and Jobs Act retained the medical deduction going forward, but with some new caveats. If you have high medical costs there are some planning strategies you can use to make sure you maximize your possible tax savings.

Employee Tax Issues
The TCJA’s Significant Tax Benefits for Employees Who Become Contract Workers – 1/17/2018

The Tax Cuts and Jobs Act changed the rules on reimbursed expenses and is causing many to consider working as a sole proprietor. This is a significant issue that includes some risk, both from the loss of job security and potential compliance issues with the IRS. This overview from the Tax Policy Center goes over the top level issues.

Home and Mortgage
New Tax Law Cracks Down On Home Mortgage Interest – 1/16/2018

The Tax Cuts and Jobs Act made significant changes to the deductibility of home mortgage interest. This includes changes to the primary and secondary home limitations. If you own a home or secondary homes, it is important to understand how these tax law changes will affect you.

Payroll
Will Your 2018 Withholding Be Right? – 1/15/2018

The big promise of the new tax reform legislation is the bump in pay coming from the lower tax rates. The IRS recently released the new withholding tables that will allow taxpayers to adjust their take-home pay.

Business Expenses
2018 Standard Mileage Rates Announced – 1/11/2018

The IRS updated the inflation-adjusted standard mileage rates for 2018. Tax reform has also brought into consideration new employee/business relationships when it comes to reimbursable expenses.

Tax Reform
2018 Pocket Tax Guide Online Edition – 1/9/2018

Feel free to bookmark the ultimate guide to the recent tax law changes and updated tax and financial tables. This 7-page guide can be referenced for many taxes and financial questions that arise throughout the year.

State Tax Issues 
State Strategies to Preserve SALT Deductions for High-Income Taxpayers – 1/05/2018

High taxed states have been on the defensive on how they can answer the new federal limits on state and local tax deductions. States like New York, New Jersey, and California have been very vocal about changes in the state code that would provide resident taxpayers some relief from these lost deductions. Tax Foundation has compiled an overview of the different proposals and whether they are feasible.

Tax Reform 
Tax Reform and Your Taxes – 12/26/2017

This excellent review, details the new tax rates, deductions, credits and more from the Tax Cuts and Jobs Act. The article is geared for individual taxpayers.

Tax Reform
Tax Reform Special Report – 12/17/2017

This unique side-by-side comparison of the old tax code to the new code has been a great reference for taxpayers and business owners. The table highlights the predominate changes and makes it easier to see how the law changes might affect you.

Tax Time Has Arrived! Are You Ready?

By Mike Jesowshek, CPA | Taxes

If you’re like most taxpayers, you find yourself with an ominous stack of “homework” around TAX TIME! Pulling together the records for your tax appointment is never easy, but the effort usually pays off in the extra tax you save! When you are fully prepared, you’ll have more time to:

• Consider every possible legal deduction;
• Evaluate which income reporting and deductions are best suited to your situation;
• Explore current law changes that affect your tax status;
• Talk about tax-planning alternatives that could reduce your future tax liability.

Choosing Your Best Alternatives – The tax law allows a variety of methods of handling income and deductions on your return. Choices you make as you prepare your return often affect not only the current year, but future returns as well. Topics these choices relate to include:

• Sales of property – If you’re receiving payments on a sales contract over a period of years, you can sometimes choose between reporting the whole gain in the year you sell or over a period of time as you receive payments from the buyer.
• Depreciation – You’re able to deduct the cost of your investment in certain business properties. You can either depreciate the costs over a number of years; or, in certain cases, deduct them all in one year.

Where to Begin? Preparation for your tax items should begin in January. Right after the New Year, set up a safe storage location, such as a file drawer, cupboard, or safe. As you receive pertinent records, file them right away, before you forget or lose them. Make this a habit, and you’ll find your job a lot easier on your appointment date. Other general suggestions to prepare for your appointment include:

• Segregate your records according to income and expense categories. File medical expense receipts in one envelope or folder, mortgage interest payment records in another, charitable donations in a third, etc. If you receive an organizer or questionnaire to complete before your appointment, fill out every section that applies to you. (Important: Read all explanations and follow instructions carefully. By design, organizers remind you of transactions you may otherwise miss.)
• Call attention to any foreign bank account, foreign financial account, or foreign trust in which you have an ownership interest, signature authority, or controlling stake. We also need to know about foreign inheritances and ownership of foreign assets. In short, bring any foreign financial dealings to our attention so we know if you have any special reporting requirements. The penalties for not making and submitting required reports can be severe.
• If you acquired your health insurance through a government Marketplace you will receive Form 1095-A, issued by the Marketplace that will include information needed to complete your return. In addition, you will need to provide proof of insurance to avoid a penalty or qualify for one of the many exemptions from the penalty. If you received a hardship penalty exemption from the Marketplace you will have been issued an exemption certificate number (ECN). That number must be included on your tax return. The 1095-A and ECN documentation need to be included with the other material you bring to your appointment. If your insurance coverage was through an employer, and the employer issued Form 1095-B, 1095-C or a substitute form detailing your coverage, bring it to the appointment.
• Keep your annual income statements separate from your other documents (e.g., W-2s from employers, 1099s from banks, stockbrokers, etc., and K-1s from partnerships). Be sure to take these documents to your appointment, including the instructions for K-1s!
• Write down questions so you don’t forget to ask them at the appointment. Review last year’s return. Compare your income on that return to your income in the current year. A dividend from ABC stock on your prior-year return may remind you that you sold ABC this year and need to report the sale, or that you haven’t yet received the current year’s 1099-DIV form.
• Make sure you have social security numbers for all your dependents. The IRS checks these carefully and can deny deductions and credits for returns filed without them.
• Compare deductions from last year with your records for this year. Did you forget anything?
• Collect any other documents and financial papers that you’re puzzled about. Prepare to bring these to your appointment so you can ask about them.

Accuracy Even for Details – To ensure the greatest accuracy possible in all detail on your return, make sure you review personal data. Check name(s), address(es), social security number(s) and occupation(s) on last year’s return. Note any changes for this year. Although your telephone numbers and e-mail address aren’t required on your return, they are always helpful should questions occur during return preparation.

Marital Status Change – If your marital status changed during the year, if you lived apart from your spouse or if your spouse died during the year, list dates and details. Bring copies of prenuptial, legal separation, divorce or property settlement agreements, if any, to your appointment. If your spouse passed away during the year, you should have a copy of his or her trust agreement or will available for review.

Dependents – If you have qualifying dependents, you will need to provide the following for each (if you previously provided us with items 1 through 3 you will not need to supply them again):

1. First and last name
2. Social security number
3. Birth date
4. Number of months living in your home
5. Their income amount (both taxable and nontaxable). If your dependent is your child over age 18, note how long the child was a full-time student during the year.

For anyone other than your child to qualify as your dependent, they must pass five strict dependency tests. If you think one or more other individuals qualify as your dependents (but you aren’t sure), tally the amounts you provided toward their support vs. the amounts they provided. This will simplify a final decision.

Some Transactions Deserve Special Treatment – Certain transactions require special treatment on your tax return. It’s a good idea to invest a little extra preparation effort when you have had the following transactions:

• Sales of Stock or Other Property: All sales of stocks, bonds, securities, real estate and any other property need to be reported on your return, even if you had no profit or loss. List each sale, and have purchase and sale documents available for each transaction.

  Purchase date, sale date, cost and selling price must all be noted on your return. Make sure this information is contained on the documents you bring to your appointment.

• Gifted or Inherited Property: If you sell property that was given to you, you need to determine when and for how much the original owner purchased it. If you sell property you inherited, you need to know the original owner’s death-date and the property’s value at that time. You may be able to find this on estate tax returns or in probate documents; otherwise, ask the executor.
• Reinvested Dividends: You may have sold stock or a mutual fund in which you participated in a dividend reinvestment program. If so, you will need to have records of each stock purchase made with the reinvested dividends.
• Sale of Home: The tax law provides special breaks for home sale gains, and you may be able to exclude up to $500,000 of the gain from your primary home if you file a married joint return and meet certain ownership, occupancy, and holding period requirements. The maximum exclusion is $250,000 for others. Since the cost of improvements made on your home can also be used to reduce any gain, it is good practice to keep a record of them. The exclusion of gain applies only to a primary residence; so keeping a record of improvement to other property, such as your second home, is important. Be sure to bring a copy of the sale documents (usually the closing escrow statement).
• Purchase of a Home: Be sure to bring a copy of the final closing escrow statement if you purchased a home.
• Vehicle Purchase: If you purchased a new plug-in electric car (or cars) this year, you may qualify for a special credit. Please bring the purchase statement to the appointment with you.
• Home Energy-Related Expenditures: If you installed a solar-electric system on your home or second home, please bring the details of the purchase and manufacturer’s credit qualification certification to your appointment. You may qualify for a substantial energy-related tax credit.
• Identity Theft: Identity theft is rampant and can impact your tax filings. If you have reason to believe that your identity has been stolen, please contact this firm as soon as possible. The IRS provides special procedures for filing if you have had your identity stolen.
• Car Expenses: Where you have used one or more automobiles for business, list the expenses of each separately. The government requires your total mileage, business miles, and commuting miles for each business use of your car to be reported on your return, so be prepared to have those numbers available. If you were reimbursed for mileage through an employer, know the reimbursement amount and whether it is included in your W-2.
• Charitable Donations: You must substantiate cash contributions (regardless of amount) with a bank record or written communication from the charity showing the name of the charitable organization, date and amount.

  Unreceipted cash donations put into a “Christmas kettle,” church collection plate, etc., are not deductible. For clothing and household contributions, items donated must generally be in good or better condition, and items such as undergarments and socks are not deductible. You must keep a record of each item contributed that indicates the name and address of the charity, date and location of the contribution, and a reasonable description of the property. Contributions valued under $250 and dropped at an unattended location do not require a receipt. For contributions above $500, the record must also include when and how the property was acquired and your cost basis in the property. For contributions above $5,000 and other types of contributions, please call this office for additional requirements.

If you have questions about assembling your tax data, please give our office a call.

1099-MISC Rundown for Fitness Studio Owners

By Mike Jesowshek, CPA | Deadlines or Notices , Taxes

At the start of every January, small business owners around the country are scrambling to understand what the requirements are behind the 1099-MISC form and what they have to do.  To help make things easier for you, I have broken down the basics behind the 1099-MISC form.

Who do I need to send a 1099-MISC to?  Any individual, company, contractor, vendor, etc. that you paid $600 or more to throughout the year in your business.  This can include payments for rent, services, prizes, legal, etc.  Any personal payments you made are not reportable.

Are there any exceptions? Yes, there are some instances in which you paid a person or company $600 or more but you do not have to issue them a 1099-MISC and those are:

• Payments to C or S Corporations
• Payments for merchandise, freight, or storage
• Payments of rent to real estate agents or property managers.  Note: If you paid rent directly to the property owner then it would still be required unless another exception was met.
• Payments made via credit/debit card or PayPal
• Payments made to employees — These would be reported on a W2 instead

Note: The C or S Corporation exception does not apply for payments to attorney’s.

How do I get the payee information? You might be getting ready to start filling out a 1099 and wondering where you find the required information from your payees.  The IRS has a Form W-9 that you can request your payee to fill out.  This will be extremely useful for you because it will provide you with the legal name, address, EIN/SSN, and indication if they meet the C or S Corporation exception.  You can download a copy of the W-9 form here.

When to file? You must have your 1099s mailed or given to your recipients and submitted to the IRS by January 31st.

What if I don’t file? You can be hit with a per form penalty depending on how long past the deadline you are.  If you intentionally do not file, the penalty can be much higher.

Tips Moving Forward

If after reading this you are starting to scramble contacting all of your previous year vendors asking for a W9, you are not alone.  However, take this as a lesson so that you can be better prepared for this time next year.  Here is a quick hit list to help relieve some stress next January:

1. Have a Solid Bookkeeping System – Make sure your books are in good order. This can be helpful in determining who might be eligible for a 1099 when January comes around.
2. Always Collect a W-9 Up Front – Do not wait until you hit $600 or next January to request a W-9 from your contractors/vendors. Ask them for this up front when your relationship first begins.

If you have any further questions regarding the 1099 Form or any other bookkeeping/tax related items, send me a message, I would be more than happy to chat.  Our firm also handles 1099 processing so if you need any help on that end, do not hesitate to reach out.

Tax Consequences of Giving Your Employees a Holiday Gift

By Mike Jesowshek, CPA | Payroll , Taxes

It is common practice this time of year for employers to give employees gifts. Where the gift is infrequently offered and has a fair market value so low that it is impractical and unreasonable to account for it, the gift’s value would be treated as a de minimis fringe benefit. As such it would be tax-free to the employee and tax deductible by the employer.

A gift of cash, regardless of the amount, is considered additional wages and subject to employment taxes (FICA) and withholding taxes. Caution: if the gift recipient is a W-2 employee, the employer may not issue them a 1099-MISC for a holiday gift of cash; the amount must be treated as W-2 income. Where an employer gives gift certificates, debit cards or similar items that are convertible to cash, the value is considered additional wages regardless of the amount. However, if the gift is a coupon that is nontransferable and convertible only into a turkey, ham, gift basket, or the like at a particular establishment, the gift coupon would not be treated as a cash equivalent.

Holiday group meals, cocktail parties, picnics or the like for employees are also treated as de minimis fringe benefits.

The entire team here at JETRO would like to wish you and your family a Merry Christmas!