Questions about issues with 1099 reporting for independent agents selling our insurance policies
I am with an insurance company that uses independent agents for selling policies. We send a 1099-Misc form to these agents for nonemployee compensation when required. We have 2 questions.
1- We currently issue a 1099-Misc when commissions are earned. The commissions may not necessarily be paid out to the agent yet but have been earned by the agent. Is this best practice?
2- We currently have an issue with a particular agent. He earned $45,000 commission in 2008 which was reported on form 1099-Misc. However, in 2010, that commission was charged back due to termination of the policy (covered in the contract) meaning the agent owed the company $45,000 in 2010. The agent paid that money back over a 2 year period. He has requested that we send a 1099-Misc with a negative amount to reduce his earnings for that chargeback in 2010 and 2011 and to show the payments he made back to the company. We do not believe a "negative" 1099 can be issued and that it would be up to the agent to reflect the money he paid back on his personal tax return. Do you have any information on anything similar?
These are complicated issues, but one's well within our expertise. Let's answer your questions using the numbered convention you provided, but first we want to address something your question has revealed about your organization's practices in regards to such matters and which we believe you must address.
Board of Directors: Employees or Independent Contractors?
Our Board of Director members have been treated and reported as employees. Is it customary to treat Board of Director members as "employees" instead of "independent contractors"? If we were to treat and report them as independent contractors, then at year end they would receive 1099-MISC form instead of a W-2 form.
This question comes up alot. And is an important one for a number or reasons, not least of which being the misunderstandings that surround how it is you are to report payments made to members of your board of directors. So let's tackle that as well as your questions.
Performance Bonuses to Former Employees for Work Done While Employed: Do We Report on the Form 1099-MISC or W-2?
In February 2013 our organization is planning to pay a performance bonus to those employees that were identified as high performers during the 2012 calendar year. About 10 of them have separated from the organization and they are no longer employees, but they qualify to receive the performance bonus. We have a three-part question:
- Do we as an organization report the performance bonus gross payment on form 1099-MISC since they are no longer employees?
- Do we as an organization report the performance bonus in Box 3 or Box 7 of form 1099-MISC?
- Will the performance bonus recipients need to pay the full self-employment tax rate (15.3%) on the received amount when they report this as income in their 2013 individual tax return?
Employee providing additional services outside scope of employment: How to Report?
One of the departments in our company is having a customer appreciation party. One of the employees from a different department has said he would do all of the grilling for a certain sum fo money. Can we pay him through accounts payable for this miscelleanous invoice/charge even though he is a employee? or should this be ran thru payroll as some type of miscelleanous charge? The amount is less than $600.00.
This is how you should approach such issues.
When individuals provide services as employees, they...
Form 1099 Question for insurance company that is planning an incentive trip that agencies will qualify for with different criteria such as policy count and loss ratio?
We are an insurance company that is planning an incentive trip that agencies will qualify for with different criteria such as policy count and loss ratio. Just wondering about a few things that hopefully you'll be able to help out with.
1. Would the agency be able to choose who would get the 1099 (i.e. agency, individual going on the trip,etc)?
2. What box the amount will go into since the trip is based on the criteria (Box 3 or Box 7)?
3. If the agency gets the 1099 - would they still get it if they are incorporated?
We will answer your questions as you have enumerated them as follows:
If we are a Multistate employer and we report all new hires to the state of Montana, which does not require independent contractors new hire reporting would we have to still report to California
From my understanding, California requires the reporting of New Hire Independent Contractors. Can you tell me if we are a Multistate employer and we report all new hires to the state of Montana, which does not require independent contractors new hire reporting would we have to still report to California? I ask this because in the following article, retrieved off the Dept of Health and Human Services, it states that we would NOT have to report new independent contractors to CA.
Would you mind confirming or clarifying this for me.
http://www.acf.hhs.gov/programs/cse/pol/AT/1998/at-9806.htm
Q17: According to OCSE-AT-97-04, issued March 12, 1997, Federal law does not require entities to report the hiring of independent contractors. If a State has nevertheless enacted a law requiring employers to report not only newly hired employees but also independent contractors, must a multistate employer that has employees and independent contractors in that State report the independent contractors to the State even if the employer had designated another State to which it will report its newly hired employees?
A17: No. A multistate employer that has employees in two or more States and that designates one State in which the employer has one or more employees to which the employer will transmit new hire reports magnetically or electronically is bound by the new hire reporting requirements of the State to which the employer chooses to report. Thus, if an employer has employees in State A and State B and chooses to designate State A as the State to which the employer will transmit the reports, the employer is bound by the requirements of State A. The employer is not required to report independent contractors to State B if State A does not require such reporting, even
Must a multistate employer that has employees and independent contractors in that state report the independent contractors to the state?
Federal law does not require entities to report the hiring of independent contractors. If a state has nevertheless enacted a law requiring employers to report independent contractors, must a multistate employer that has employees and independent contractors in that state report the independent contractors to the state even if the employer had designated another state to which it will report its newly hired employees?
Independent Contractor vs. Employee vs. Temp?
We have a Branch Office that was using an employee to prepare the daily recordings and take them to the Recorders office. In order to give her additional time at work for her usual duties, they hired someone else to prepare the recordings and provide a courier service. This person has two other customers. Would they qualify as an independent contractor? Or Would they have to pay him through payroll/temp agency?
You state that they hired "someone else to prepare the recordings and provide a courier service." Then you state that the same person has two more customers. There are a number of issues this situation raises.
Question on Reimbursing Independent Contractors and 1099 Reporting
In the past my company has only reported labor paid to Independent Contractors on 1099s. We are considering stopping this practice and reporting the entire payments made to an IC in a given year (labor & ODCs) as backing out expenses is time consuming and the possibility for error is greater. Is this acceptable with the IRS? What is the rule?
When it comes to reimbursing for expenses paid to indepedent contractors there is no hard and fast rule.
Here are some tips and your answers:
IRS Publication 463 is what you want to look to for much more information on this subject.
LLC Vendor and Information Provided on New Form W-9: How to Document?
When requesting an updated Jan 2011 W-9 from a vendor, I received the following response and it is not the first like it. Can you help me respond correctly? I am not finding information on how to complete the new form so I am not quite sure where there expanation is coming from.
In response, attached is the new W-9 for XXX Constructors, LLC (f.k.a. XXXA Constructors, LLC). Please note that the IRS recently changed the format and information required on the W-9 form. Previously the form would have shown only XXXA Constructors, LLC with its tax identification number of xx-xxxxx22. Because the company is a limited liability company and is disregarded for tax purposes by the IRS, XXXA Constructors, LLC is now required to provide the name of its direct parent, XXXB Group, Inc., as the taxable entity, with XXXB Group’s tax identification number, and the name of XXXA Constructors, LLC listed on the second line. To avoid any confusion, we want to emphasize that XXXA Constructors, LLC is the entity obligated (or to be obligated) under contract and the entity that will be performing all services and receiving payments as specified in the contract. XXXB Group, Inc. serves only as a holding company and does not perform services. For all purposes other than the W-9, XXXA Constructors, LLC tax identification number is still valid and will continue in use.