Information Returns (W-2s & 1099s) - Are You Complying?

Request a completed W-9 form to
verify 1099 recipient information.

Increased IRS 2011 information returns penalties
The IRS has increased penalties for information returns (W-2s and 1099s). Penalties may be assessed for missing/incorrect taxpayer identification number (TIN), untimely filing, or using an incorrect media or format. These penalties can quickly add up to thousands of dollars.

Bergan Paulsen advises that you verify W-2 and 1099 recipient information before the returns are prepared. You may request the information by mail or electronically by sending the 1099 recipient a W-9 form to complete and return. In the case of a W-2 recipient, a W-4 should already be in their personnel file. The payee may also be contacted by phone for their information.

All communication methods must state that the recipient provide an accurate TIN number for reporting purposes or they may be subject to backup withholding. You, as the employer or payor, should document and retain the solicitations to ensure a reasonable cause defense on a penalty notice.

How do I prepare the recipient section of my 2011, 1099 forms correctly?
A business EIN must be used for a partnership, corporation, or non-disregarded Limited Liability Company (LLC). A Social Security number (SSN) must be used with an individual name (in the first name line). A Sole Proprietor must always provide his/her individual name. A Sole Proprietor may provide his/her Doing Business As (DBA) name (in the second line) in addition to the required individual name together with the matching SSN.

How is a Name/Taxpayer ID (TIN) number mismatch identified?
A Name/TIN combination is incorrect if it does not match, or cannot be found, on IRS or Social Security Administration files. For example, a Name/TIN mismatch occurs when an individual name is submitted with a TIN not associated with the individual name provided. A TIN is not interchangeable with different names.

IRS Taxpayer Identification Number (TIN) Matching
TIN matching is a pre-filing e-service that allows authorized payers the opportunity to match 1099 payee information against IRS records prior to filing information returns. The interactive TIN matching will accept up to 25 payee TIN/Name combinations on screen while bulk TIN matching will allow up to 100,000 payee TIN/Name combinations to be matched via a text file submission. You may register for this service at the e-services section on the IRS website.

Due Dates to Remember:

2011 W2 Forms :

• January 31, 2012 Provide W2s to employees
• February 29, 2012 Paper W2 & W3 forms due to the Social Security Administration
• April 2, 2012 e-filed W2 & W3 forms due to the Social Security Administration

2011 1099 Forms:

• January 31, 2012 Provide 1099s to recipients
• February 29, 2012 Paper 1099 forms due to the IRS
• April 2, 2012 e-filed 1099 forms due to the IRS

Related Article: Form 1099 Filing Requirements