Finance News & Insights

Could this 1099 relief be coming your way?

Fewer penalties, easier-to-follow form instructions – all of these could be in your company’s future …

… if the IRS takes the recommendations recently put out by the Information Reporting Program Advisory Committee (IRPAC).

And the Taxman does take notice. In fact, several of the committee’s recent suggestions have been adopted by IRS.

You’ll certainly want the latest round of recommendations to be adopted – as will your A/P staffers. Many of the proposed actions would make A/P‘s trickiest task – 1099 compliance – less of a burden.

Take a look at what IRPAC recommended in its latest report.

Recommendation 1: Set a de minimis dollar threshold for 1099-MISC corrections

Say your company made just an error or two on a return. If IRPAC has its way, your staffers wouldn’t have to be bothered with correcting and resubmitting the forms.

The committee is recommending that the Service set a provide a safe harbor that net changes of $50 or less (in either direction) wouldn’t be subject to penalty provisions for information returns.

Recommendation 2: Offer a better way for small businesses to e-file their 1099-MISCs

IRS does have electronic filing options available, and if your company issues more than 250 info returns, you’re required to e-file. But what if you don’t have nearly that number?

IRPAC wants to make that process easier on employers, too. The committee has suggested this before with no luck, but it is once again pushing IRS to establish an e-file service specifically for smaller businesses that file only a few 1099-MISCs each year.

Not only that, but IRPAC is also asking the Taxman to revise the 1099-MISC instructions to make it clearer what’s expected of companies (particularly smaller businesses, which seem to struggle most with the form).

Recommendation 3: Revise Form W-9 instructions

Speaking of instructions, there’s another place in the 1099 process IRPAC believes could stand some improvement: Form W-9, Request for Taxpayer Identification Number and Certification.

IRPAC is pleading for an overhaul of W-9 instructions. The main reason? Small businesses and independent contractors don’t understand the importance of filling out the form in the first place!

No doubt your A/P staffers have struggled with that as they try to get those taxpayer ID numbers and other compliance-critical information from vendors. Many A/P pros tell us it’s one of their biggest headaches.

In fact, in some cases this lack of understanding leads to unnecessary backup withholding. And that’s the last thing any finance department wants.

That’s why IRPAC is suggesting IRS make some adjustments. Specifically, the committee wants the Taxman to make the form easier to understand by referencing line numbers on Form W-9 and providing clearer form instructions.

Let your staffers know: IRPAC is already working closely with IRS on this one to make sure the revisions are incorporated in the instructions.

As for the other two recommendations? Time will tell. Stay tuned. We’ll keep you posted the minute there is any movement.

Info: To read the complete IRPAC report, click www.irs.gov/Tax-Professionals/2014-Information-Reporting-Program-Advisory-Committee-Public-Report

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