December and January are undoubtedly busy times for businesses with closing out their calendar years, gathering documentation for their accountants, tax preparers, and auditors, and filing wage and income information returns to taxing authorities for their employees and contractors.  Unfortunately, adding to this year’s stress and complexities are some accelerated due dates for certain information returns.  Below are those changes and some important reminders.

Wage and Income Reporting for 2016- W-2 and 1099 Changes and Reminders

What’s Due by January 31, 2017?

     W-2 AND W-3 FORMS

  • *NEW*–W-3 Transmittal Form along with Copy A of W-2 to Social Security Administration (formerly due by end of February—no longer will businesses have the extra  month after issuing employee copies of W-2 to correct any errors reported)
  • W-2, Copies B, C, and 2 are due to employees by January 31, as usual

*NEW*–Penalties increase: $50 per W-2 if filed correctly 30 days late; $100 per W-2 if filed correctly more than 30 days late, but by August 1; $260 per W-2 if filed after August 1.  You may be subject to a penalty if you fail to file timely, fail to include all required W-2 information, report incorrect information or ID numbers, or file paper W-2 forms when you are required to electronically file.

  • Virginia requires Copy 1 of W-2 to be filed electronically by January 31 (when W-2 reflects Virginia income tax withheld) All employee Copy 1 forms must be electronically filed with Virginia, there is no filing number threshold.
  • Employers filing 250 or more Forms W-2 with the Social Security Administration must file them electronically
  • Employers filing fewer than 250 Forms W-2 for the previous calendar year will not be required to report the cost of employer provided health care coverage on 2016 W-2s

1096 AND 1099 FORMS

  • *NEW*–Form 1096 transmittal along with Copy A of Form 1099-MISC, when you are reporting nonemployee compensation in box 7, is due to IRS by January 31 (formerly due February 28).  Also note that form 1096 and Copy A of Forms 1099 are still required to be reported on official red IRS forms.
  • Form 1096 transmittal along with Copy A of Forms 1099 (other than exception above), 1097, 1098, W-2 G, etc. are due February 28 if filing on paper, March 31 if filing electronically.
  • Generally, Copy B of Forms 1099 is due to recipient by January 31, as usual. EXCEPTION TO THIS is Forms 1099-B, 1099-S, and 1099-MISC reporting payments in box 8 (substitute payments in lieu of dividends or interest) or box  14 (gross proceeds paid to an attorney), then Copy B is due to recipients by February 15.

What payments must be reported on 1099-MISC?

  • Only payments made in your trade or business (nonprofit organizations are considered to be engaged in a trade or business for these reporting requirements) Personal payments are not reportable.  It is the position of the AICPA that most small landlords are not engaged in a trade or business and do not need to file 1099s.  Consult your tax advisor as to what rental activities constitute a trade or business.
  • Report payments of at least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest;
  • Report payments of at least $600 in:
    • rents;
    • services performed by someone who is not your employee;
    • prizes and awards;
    • other income payments;
    • medical and health care payments;
    • crop insurance proceeds;
    • cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish;
    • generally, the cash paid from a notional principal contract to an individual, partnership, or estate;
    • payments to an attorney; or
    • any fishing boat proceeds
  • Some Exceptions to payment reporting:Payments to a corporation (does not apply to attorney corporations)
    • Payments for merchandise, telephone, utilities, freight, storage
    • Payments of rent to real estate agents
    • Wages to employees
    • See IRS website for more exceptions

Penalties for non-filing of 1099 forms are very similar to those noted above for W-2s.