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Wrapping Up Your Business for Year-End: Tax Forms

By MarksNelson on November 28, 2017 in Articles, Entrepreneurial Services, Nicole Eshnaur CPA MBA, CGMA
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As you enter into the last month of the year, you have many aspects of your business to wrap up before starting a new year.  One of those areas is updating your vendor files to ensure adequate information has been received to prepare the required information returns or 1099s.

Every vendor file should include Form W-9 signed by the vendor verifying its address, taxpayer identification number, and federal tax classification.  This form will help to determine whether the recipient is required to receive a 1099, as well as verifying the legal name, address and identification number.  If the above information is reported incorrectly, a notice will be issued by the IRS.

Form 1099-MISC is required to be issued to any non-employee you paid $600 or more to during the year.  The total to report on the form should be the cash payments made during the year.  Payments to consider include:

  • Rents
  • Services performed in the course of trade or business, including subcontractors, independent contractors, or directors
  • Prizes and awards
  • Gross proceeds paid to attorneys
  • Medical and health care payments
  • Crop insurance proceeds

These forms, when reporting nonemployee compensation (Box 7), are due to the recipients and to the IRS by January 31, 2018.  Penalties will be assessed for the failure to file correct information returns by the due dates and for the failure to furnish correct payee statements.  A penalty may also be assessed if you are required to file more than 250 information returns and do not file them electronically.

Additional annual returns include Forms W-2 and W-3 and Forms 1095-B and 1095-C.  These forms report employee-related information, so be sure to update employee records for current and prior employees to confirm correct addresses are reported.

Form W-2 and W-3 should also be prepared for your household employees.  A household employee is someone you hired to do household work, including (but not limited to) babysitters, caretakers, housekeepers, nannies, and yard workers.  If the worker controls how the work is done, the worker may not be your employee, but instead is self-employed or an employee of another business.  These employees should be set up the same as employees in a trade or business; however, the federal taxes are remitted with your individual return (Form 1040).

Again, both the recipient copies of the information returns and the copies that go to the IRS are due by January 31st. If the number of information returns you are filing is greater than 250 for a specific type (W-2, 1099, 1095), you are required to file them electronically.

A few other reminders to prepare for 2018: 

The social security wage base that is taxed at 6.2% will increase to $128,400 up from $127,200 for 2017.

  • The annual maximum that can be contributed to 401(k) and 403(b) is increasing $500 to $18,500.  The maximum catch-up contribution for participants age 50 or over remains unchanged at $6,000.
  • The dollar limitation for contributions to §125 flexible health spending arrangements increases $50 to $2,650.

Please contact your MarksNelson advisor at 816-743-7700 if you have any questions or need assistance as you close out 2017.

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Nicole Eshnaur

Practice Leader-Accounting Services