Articles and Tax Tips

On August 16, 2010 the IRS issued guidelines regarding the mandatory information reporting of payments made to merchants by third parties and information reporting penalties and backup withholding rules for third party and payment card transactions; mostly defining who is responsible for what. Perhaps the most important part of the new guidelines, at least for the majority of information reporters, is in regards to payment card (P-Card) transactions and thus the focus of this article is on the sections of the law applicable to P-Card reporting. In particular...

The Internal Revenue Service announced on August 4, 2010 that is has consolidated its Large and Mid-Size Business (LMSB) division and, effective October 1st, has renamed it the Large Business and International Division (LB&I). This is significant for information reporters because....

On June 10, 2010 The Treasury Inspector General for Tax Administration, TIGTA, announced the Internal Revenue Service ("IRS") is making a major compliance push in addressing reporting related to complex financial holdings and international tax law issues among other things... 

1099 reporting professionals to benefit from expert consultation paired with innovative tax software solutions

Convey Compliance Systems and TIR Consulting LLC today announced a strategic partnership. Each company offers a unique set of products and services that together will enable organizations to reduce the costs and risks associated with 1099 reporting.

The Internal Revenue Service is seeking public comment on how to most effectively carry out recent Form 1099 reporting related changes in the law. These changes, starting in 2012, will require businesses to report a wider range of payments to contractors, vendors and others. Consequently, the IRS is seeking guidance, through your comments, so as to better implement the new laws and avoid putting an excessive burden on both you and the IRS. Comments are requested on the following topics:

 
1.) P-Cards: Under a proposed regulation, many business purchases made with credit or debit cards would be exempt from the new reporting requirement because they are already reported by banks and other payment processors. The IRS seeks comments on additional circumstances in which duplicate reporting might otherwise occur and on rules that would prevent such duplicate reporting.

2.) The March 2010 change, effective 2012, requiring expanded existing reporting requirements to include a business’s payments related to goods and other property.
 
3.) The March 2010 change, effective 2012, requiring expanded information reporting requirements to most corporations (with exceptions for legal and medical service providers notwithstanding these payments are currently exempt from reporting).

There are three ways to submit comments, including by email so act now as the deadline to respond is September 29, 2010. Further details are in IRS Notice 2010-51.

On June 2, 2010 The Internal Revenue Service (”IRS”) announced the long awaited change in procedures for individual payees to follow for obtaining validation of social security numbers (“SSNs”) from the Social Security Administration (“SSA”) to prevent or stop backup withholding under section 3406 of the Internal Revenue Code following receipt of a second “B-notice” from a payor. 

 
This announcement (Announcement 2010-41) follows last year’s decision by the SSA to discontinue Form SSA-7028, ostensibly because the SSA legal team determined SSA-7028 lacked the ability to qualify as proper third party notification. Such a huge change had left many unanswered questions for those of you processing IRS B-Notices; questions that can now be answered. Though the Information Reporting Advisory Committee (IRPAC) spoke with both the IRS and SSA, and issued a letter to the IRS on May 15, 2009 seeking further guidance and making several logical requests for clarification and guidance moving forward regarding processing 2nd B-Notices; it was only on June 2nd that the IRS announced their new recommendations.
 
The following article will first summarize Form SSA-7028’s previous role in the processing of a B-Notice (a notice that the name/TIN combination submitted on an information return has failed to match either IRS or SSA records). Then, it will explain what Announcement 2010-41 (which will be published in IRB 2010-25 on June 21, 2010) means for you in regards to not only how you process this spring’s B-Notices but also revamping your B-Notice processing policies and procedures.

By Steven D. Mercatante Esq.