By Rob Holcomb, EA
Extension Educator, Ag. Business Management
University of Minnesota Extension
January 12, 2017
New for 2016, in an effort to combat identity theft, the IRS is requiring employers and business owners to file forms W-2, W-3 and 1099-MISC by January 31, 2017. These changes were contained in the PATH Act (Protecting Americans from Tax Hikes) which was signed into law December of 2015.
A W-2 is the form that reports wages paid to an employee. The W-3 is a transmittal form that summarizes all the W-2s issued from a single employer.
Form 1099-MISC is issued to individuals or entities that are not employees. Form 1099-MISC is typically issued for rent, non-employee compensation and custom hire. The payment threshold for issuing a 1099-MISC is $600. The threshold is based upon the total amount paid to the individual or entity during the calendar year without regard to the number of checks or transactions. Typically, corporations are exempt from the filing requirements to issue Form 1099-MISC. In other words, if you paid over $600 to a corporation for custom harvesting, you would not be required to file a 1099-MISC because you paid the funds to a corporation. There are two exceptions to this rule: (1) Attorney fees (over $600) paid in the course of a trade or business requires filing a 1099-MISC even if the firm is incorporated. (2) Payments to veterinarians are payments for medical and health care services. This requires taxpayers to issue Form 1099-MISC for such services (over $600) in the course of a trade or business even if the veterinarian is incorporated.
New legislation increases the penalties for failure to timely file information returns. The new penalties are in effect for all information returns due after December 31, 2015. Penalties range from $50 per return to $250 per return depending upon when the taxpayer issues the required information return. For failures or misstatements due to intentional disregard, the penalty per return or statement increases to $500.
Agricultural Tax Issues. Fall 2015. Harris, P.E., Tax Insight, LLC. Madison, WI.
2016 National Income Tax Workbook. Land Grant University Tax Education Foundation. www.taxworkbook.com
Internal Revenue Service Website. www.irs.gov