Form 1099 Increased IRS Scrutiny

To Our Business Tax Return Clients:

We want to remind you that Form 1099-MISC must be issued to individuals and other unincorporated entities to which you paid $600 or more for services in calendar year 2011.  Included in the list of required recipients are attorneys and medical care providers (but not health insurance), whether incorporated or not.  Likewise, Forms 1099-INT and 1099-DIV must be issued to recipients of interest and dividend income, respectively.

Forms 1099 must be received by the payee no later than January 31, 2012, and transmitted to the IRS with Form 1096 no later than February 29, 2012.

PLEASE NOTE:  This is an area of greatly increased IRS scrutiny.  All business returns — meaning Schedules C and F of Form 1040, Form 1120S (S corporation return), Form 1120 (corporate return), Form 1065 (partnership return) — now contain the following questions on the tax form:

  • Did (you/the corporation/the partnership) make any payments in 2011 that would require (you/it) to file Form(s) 1099?   This must be answered yes or no.
  • If “Yes,” did (you/the corporation/the partnership) or will (you/the corporation/the partnership) file all required Forms 1099.

Remember that the signature block of all tax returns contains the following language: “Under penalties of perjury, I declare that I have examined this return, including accompanying schedules and statements, and to the best of my knowledge and belief, it is true, correct and complete.”

It is our understanding that these boxes cannot be left blank because e-filed returns will be rejected if the boxes are unanswered.  It is also our understanding that this raises the potential penalties for each 1099 not filed from $100 to $500.

We recognize that this increased IRS scrutiny is a headache and that this letter is, necessarily, strongly worded.  If you have any questions or concerns about this matter, please do not hesitate to call or email us so we can discuss it.

 Very truly yours,

 Grooms & Harkins, P.C.

Posted in Personal Taxes | Leave a comment

After The Downgrade

Unimpressed with U.S. deficit reduction plans, S&P delivers on its warning.

Presented by Deanna R Pickering, CPA, PFS

Unprecedented and unsettling. Standard & Poor’s issued a historic downgrade of U.S. debt on August 5, sensibly waiting until the market week had concluded to send a shock wave toward global investors. It reduced America’s long-term debt rating – which had been AAA since 1941 – to AA+.1

S&P felt Congress did too little too late. The credit rating agency had threatened to lower the boom if Congress passed any deficit reduction plan smaller than $4 trillion in scope. The Budget Control Act of 2011 “falls short of what, in our view, Continue reading

Posted in Personal Taxes | Leave a comment

The Current CD Quandary

Today’s yields can’t beat inflation.

Presented by Deanna R Pickering

CD investors are effectively losing money. According to Market Rates Insight, a research firm tracking bank rates, annualized inflation has surpassed long-term certificate of deposit rates since February. In April, 12-month inflation hit 3.16% while the highest-yielding 5-year callable CD on the market offered a 2.4% interest rate. May’s Consumer Price Index put annualized inflation at 3.6%; as of mid-June, the highest- Continue reading

Posted in Estate Planning, News, Personal Taxes | Leave a comment

Progress on the building

We’ve put a video on our Facebook page showing the office and where we stand with contractors, etc.  Please take a look at your convenience.  Thank you again for all of your support.

Posted in Personal Taxes | Leave a comment

Update to the events of May 3, 2011

On Tuesday, May 3, 2011 a pickup truck traveling at or near 70 mph crashed into the side of our office building after hitting and killing a young man on the sidewalk a block up the street.  I cannot attest to the events leading up to the crash, only to the events subsequent to the truck coming to rest in the middle of our office.  There are currently 14 people who work for our firm.  Seven of them were in Continuing Professional Education (CPE), one was on vacation, one was on personal time, I was at a board meeting off site, and four employees were in their offices working.

The man exited the vehicle inside our office and was apprehended by law enforcement within seconds.  All four employees exited the building unharmed.  One was very close to the crash and had to climb over debris to exit his work area, but escaped without a scratch.  The man was detained in our office until he was taken into custody.

The offices of Ted and Chuck, my fellow shareholders, were completely destroyed as well as the office of another employee roughly 2/3 of the way into the building.

I first need to say how saddened we are by the loss of life of a young man walking down the street.  His family is in our prayers.

I have never had the misfortune of being in a tornado, but I now have some small sense of what it must feel like to clean up.  A heating element along the wall was destroyed which released water into the office until the firemen crimped the pipes to turn it off.  It wasn’t a huge amount of water, but enough Continue reading

Posted in News | 2 Comments

A Praise God Moment for our Firm

This morning at about 9:00 am a man in a large pickup drove through our office wall.  The details can be found at www.trib.com.  Everyone in our office is safe and unharmed. 

We praise God for the safety of our employees.  We are saddened by the death of a pedestrian and we pray for his family.

We want to thank everyone for their prayers and concerns.

Posted in Personal Taxes | 1 Comment

IRS Drops and Gives You 10… Military Tax Tips

(IRS Summertime Tax Tip 2010-07)

In its summer series of tax tips, the IRS provided a few pointers that might help us with military clients.

Combat Pay. If the service person serves in a combat zone as an enlisted person or as a warrant officer for any part of a month, all of the Continue reading

Posted in Personal Taxes | Leave a comment

The Bush-Era Tax Cuts Live On

A holiday gift for taxpayers? After a 277-148 passage in the House and an 81-19 approval in the Senate, President Obama signed the 2010 Tax Relief Act into law on December 17, extending the Bush-era tax cuts.1Here is the impact of the new legislation:

Current federal income tax rates are preserved for everyone. The federal income tax brackets will remain at 10%, 15%,25%, 28%, 33% and 35% for 2011 and 2012.2 Continue reading

Posted in Business Taxes, Estate Planning, Personal Taxes | Leave a comment

RMD’s to Charity Extended

President Obama signed the new tax law bill on Friday, December 17 that extends Qualified Charitable Distribution (QCD) for tax years 2010 and 2011. Individuals who are owners of a traditional IRA and are age 70 1/2 and older stand to benefit from this extension. The Qualified Charitable Distribution (QCD) allows individuals age 70 1/2 or older to directly donate up to $100,000 per year from their traditionalIRA to a qualified charity. This is particularly appealing for individuals who need to take a required minimum distribution (RMD).

Now an RMD up to $100,000 can go directly to a charity as long as the IRA owner follows the distribution rules, but doesn’t have to count the donated money as taxable income. And because of the delay in getting this law extended, the new tax law bill provides a grace period. Eligible IRA owners can make their retirement account charitable donations as late as January 2011 and have the distributions count as if they were made for the 2010 tax year. This means an individual that has not taken his/her RMD and QCD for 2010 can delay both until January 2011. If an individual does not intend to make a QCD for 2010 they cannot delay RMD until January 2011. The bill did not address those individuals who have already taken an RMD.

Posted in Personal Taxes | 1 Comment

Apply for Social Security Now… or Later?

Now or later? When it comes to the question of Social Security income, the choice looms large. Should you apply now to get earlier payments? Or wait for a few years to get larger checks?

Consider what you know (and don’t know). You know how much retirement money you have; you may have a clear projection of retirement income from other potential sources. Other factors aren’t as foreseeable. You don’t know exactly how longyou will live, so you can’t predict your lifetime Social Security payout. You may even end up returning to work again. Continue reading

Posted in Estate Planning | Leave a comment