Penalties Increase for Failure to File Accurate and Timely 1099s – One of Many Changes Outlined in Our 2013 Payroll Taxes and Withholdings Update: Part2
In this second of four blogs posts, we will review changes to Information Returns and the Minimum Wage. We also take summarize pertinent information about Form W-4, Missouri Form W-4, Unsubstantiated Business Expenses or Advances, and Tax Deposits.
Failure to file accurate and timely 1099 forms continues to carry severe penalties ($30.00 to $100.00 per 1099). Accordingly, we are reminding you of the filing requirements for payments made during 2012.
Among other requirements, an entity must report on Form 1099 payments of $600.00 or more to non-corporate “service providers”. This includes rent, fees, commissions, prizes, awards or any other form of remuneration paid to non-employees. An example would be a consultant who is not incorporated. Any dividend or interest payment of $10.00 or more must be reported to the Internal Revenue Service (IRS) and the recipient. The 2012 Form 1099 must be given to the recipient by January 31, 2013 and to the IRS by February 28, 2013. Payments made for legal services must be reported even if the payment is made to the attorney’s professional corporation. Additionally, gross proceeds paid to an attorney (for example, as a settlement in a lawsuit) must be reported even if the amount is less than $600.00.
Taxpayers are asked to certify the correct filing of Form 1099 in conjunction with filing their annual income tax returns.
The Missouri minimum wage will increase to $7.35 per hour which was effective January 1, 2013. The Illinois minimum wage will remain at $8.25 per hour. Employees under the age of 20 can continue to be paid $4.25 per hour during their first 90 consecutive calendar days of employment with an employer. Employers of “tipped employees” must comply with minimum wage laws, but can claim a tip credit against their minimum wage obligation.
A Form W-4 on which an employee claims exemption from withholding legally expires February 15 of the year after it is filed. Remind employees who claimed exemption from withholding on their 2012 Form W-4 the exemption expires and they will need to file a new 2013 Form W-4 on or before February 15, 2013. The 2013 forms are available at http://www.irs.ustreas.gov. Forms W-4 must be available for inspection by an IRS employee if requested. Employers may receive requests from the IRS requiring submission of a copy of Form W-4 for one or more employees.
Missouri Form W-4
Form MO W-4 allows employees to claim the same allowances as on the Federal Form W-4. Employees should review the Form MO W-4 to ensure correct withholdings. The employer must send a copy of Form MO W-4 to the Department of Revenue within 20 days after any NEW employee completes the form. This information is being used to enforce the state’s child support laws. The 2013 Forms are available at http://dor.mo.gov/forms/.
Unsubstantiated Business Expenses or Advances
An employee is required to substantiate expenses to an employer and any amount exceeding the amount substantiated must be returned to the employer. Unsubstantiated amounts must be reported as Form W-2 (and FICA) income.
The IRS has recently mailed letters to all employers regarding their specific payroll deposit requirements. Depository requirements are now determined by the employer’s tax liability during a “look-back” period (July 1 to June 30 of the previous year). Employers with less than $50,000.00 of deposit liability during the “look-back” period will be required to make a deposit on or before the 15th of the following month.
Employers who report $50,000.00 or more in total employment tax liability during the “look-back” period will be designated as semi-weekly depositors. For semi-weekly depositors, the due date depends on when wages are paid. For pay days on Wednesday, Thursday, or Friday, the deposit is due on or before the following Wednesday. For pay days on Saturday, Sunday, Monday, or Tuesday, the deposit is due on or before the following Friday.
Accumulated employer federal withholding and social security taxes of $100,000.00 and over must be deposited the next banking day after accumulation irrespective of the preceding.
If you have questions about these changes, please contact your Anders advisor. We will address additional changes in the next blog on Payroll and Withholding.