Articles and Tax Tips

By Steven D. Mercatante Esq.
 
Risk is inherent in doing business therefore, the need to minimize risk is essential to maximizing organizational goals. If you fail to meet regulatory standards then you are setting up your organization for unnecessary exposure to risks. What kind of basic risks are we talking about? The following article will examine some of the more common information reporting risks you can run across as well as how you can make the changes needed to protect your organization.
 
Information Reporting Risk Basics
 
Form 1099 compliance is part and parcel of IRS compliance efforts, including the audit process. Auditors/examiners look at more than the Forms 1099 filed; they look at every payment made. Their goal is simple, to find those payments that should have been reported but were not.
 
What you need to know is that... 

By Steven D. Mercatante Esq.
 
One of the most common questions we receive revolves around the issue of LLC reporting. The following article will begin our exploration into the basic LLC structures with a detailed look at the Single-Member LLC while also offering some practical tips on how to handle your reporting requirements.
 
Before we get started, know that LLC stands for “Limited Liability Company;” NOT “Limited Liability Corporation.” Be patient with your payees, just because you know what an LLC is does not mean they even know what their own entity designation stands for. Do not argue with your payees, just ask for the proper documentation and if they insist they are an LLC “and that means they are a corporation” then you will just tell them what documentation you need to see; more on that documentation in a moment.
 
An LLC is problematic for reporting purposes because it can register as a number of different entity types, making it difficult to identify when reporting is required. Especially problematic is the rare situation when an LLC indicates it is a corporation, and exempt from reporting. We say this situation is rare because the overwhelming majority of organizations classified as LLCs are truly not corporations.
 
There is one more thing you need to know about LLC formation before we move on to our discussion of single-member LLC’s... 

By Steven D. Mercatante Esq.
 
One of the most common questions we receive revolves around the issue of LLC reporting. The following article will continue our exploration into the basic LLC structures with a detailed look at the Multi-Member LLC while also offering some practical tips on how to handle your reporting requirements.
 
Before we get started, know that LLC stands for “Limited Liability Company;” NOT “Limited Liability Corporation.” In addition, be patient with your payees, just because you know what an LLC is does not mean they even know what their own entity designation stands for. Do not argue with your payees, just ask for the proper documentation and if they insist they are an LLC “and that means they are a corporation” then you will just tell them what documentation you need to see; more on that documentation in a moment... 

By Steven D. Mercatante Esq.

 
All too often, the entity we thought we were reporting to is sold to a new owner in the midst of the year. Do you know what to do when this happens and you continue to make payments to the new owner? Many 1099 professionals do not. The following article explore your basic approach to handling just such a situation while also offering some practical tips on how to handle your reporting requirements.
 
Assuming you are aware of the change in ownership your response is actually quite simple... 

By Steven D. Mercatante Esq.

 
The IRS demands quite a bit of you and it is only reasonable for you to seek to make your job easier. One such way is via the use and acceptance of electronically transmitted information collecting and reporting documentation. Just make sure you are aware of when such practices are allowable and when they are not. The following article provides a starting point for those of you who have chosen to collect payee information electronically.
 
In short, if you are receiving emailed Forms W-9 you will need to be careful. This is because IRS approval for such practices depends upon two key elements... 

By Steven D. Mercatante Esq.
 
Earlier this year I wrote an article explaining how you to handle reporting worker use of cell phones. At the time of printing, there was no indication of when changes would be forthcoming in the law. With Notice 2009-46 however, it appears the IRS has decided to act, but is seeking your input first. Do not miss out on this opportunity to shape changes in the law. Though compliance with IRS rules and regulations can seem never ending it is far better if you not only understand the issue but are able to move the IRS in a direction that makes for an easier and smoother compliance related process on your end. Having reviewed where the law stands today in our past article, this article will summarize where we stand today on the reporting issues surrounding using cell phones for work and then explore what is being proposed by Notice 2009-46.  

By Steven D. Mercatante Esq.
 
IRS Publication 78 is a wonderful tool capable of helping you to identify who truly is exempt from reporting. We all know of various categories of individuals and entities exempt from reporting; however, one of the trickier categories or exempt payees remains charities. This is where IRS Publication 78 offers significant help. The following article will briefly describe how IRS Publication 78 can help you document your payee’s charitable status and what you should do if your payee fails to show up in Publication 78 but still claims charitable status. 

By Steven D. Mercatante Esq.
 
Take note: the Social Security Administration (SSA) has discontinued 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 leaves many unanswered questions for those of you processing IRS B-Notices or looking forward to the Fall B-Notice season. The following article will first summarize Form SSA-7028’s role in the processing a B-Notice (a notice that the name/TIN combination submitted on an information return has failed to match either IRS or SSA records) and then explain what the IRS has done before finishing with a look at what guidance can be expected in the near future.
 
First, a summary of B-Notice processing basics.

IRS Form 972-CG (also known as “The Proposed Penalty Notice”) is one of the more serious communications you can receive from the IRS. It demands a response. What is more, a response indicating an ignorance of the law can cost you big time. That said, arguing your way out of a proposed penalty is entirely possible; provided you know what you are doing and can back up your words with significant documentation. Although the summer months are often regarded as a down time in the information-reporting world the reality is that the Proposed Penalty Notice lurks in the dog days of summer. If you do not know how to handle the Form 972-CG when your organization receives one it can bite you for years to come.
 
In this article we focus on the Proposed Penalty Notice – what it is, how to recognize one when you receive it and how you should respond. First, let’s clarify what the Form 972-CG is and what it is not.  

By Steven D. Mercatante Esq.
 
In the first two parts of this article series we have learned what the United States Treasury Department’s Office of Foreign Assets and Control (OFAC) is, what its goals are and how you can stay compliant. In this final article in our three-part series on OFAC we will provide some guidance in case, having set up your compliance program, you have discovered that your organization has accidently failed to comply with the OFAC rules and actually set up an account with a SDN.
 
What if I have accidently set up an account with an SDN?
 
Before you react to a discovery you may have set up an account with an SDN you need to confirm whether this is the case. Treasury refers to this process as taking the appropriate “due diligence” steps to ascertain whether you have a valid OFAC match. You should be familiar with the term due diligence already; it is what you do in any number of situations regarding obtaining and verifying the correct name and TIN of your non-OFAC related payees. The government expects you to act as a reasonably prudent person and then document what it is you have done to meet the specifications of the law. If you are still unsure as to how a reasonably prudent person acts from the perspective of the Treasury Department or IRS, we recommend you review the reasonable cause regulations under Internal Revenue Code §6724.
 
In an OFAC context, you will perform your due diligence and act reasonably by first...