Are you in compliance?
Recently, the IRS introduced several new reporting requirements somewhat
unexpectedly. Four critical ones are outlined below. All taxpayers
should review them to judge whether they are affected by the changes and what to
look for in order to comply with the new requirements.
1099-B: New way to report securities sales:
As in the past, a Form 1099-B Proceeds from Broker and Barter Exchange
Transactions will be sent to any
taxpayer who sells stock. But now the revised form will disclose
the cost basis of those securities sold and acquired for the account through
transfers or purchases after 2010. What happens to those sales after 2010 on
securities acquired before 2011? We report them the same as we always did.
The added burden now is to determine if the 1099-B cost basis used to
determine taxable gains or losses on those specific transactions are correct. Some of those securities, for example, might be transferred into
the account from another external account. Is the cost basis the amount
reported when the transfer takes place after 2010 or were the securities purchased/acquired before 2011? The taxpayer needs to police the accuracy
of the 1099-B information so corrections can be made. A new IRS Form
8938 provides the means to report corrections.
Form 1099-K: New way to report business revenues.
If you received business revenues greater than $20,000 or by way of more than 200
separate Credit Card/PayPal payments, those reported revenues must now be broken out by payments received via
merchant credit-card accounts versus other forms of payment. A Form 1099-K
is created by the payment processors so that merchant credit-card companies and
PayPal can summarize sales by month
and for the calendar year according to the card used . . . AMEX, Discovery,
Master Card, Visa, etc. The credit-card processors have until February 15 to issue the
forms. This information is required in order to properly file
Corporations, Partnerships and individual returns containing self-employed
business activities (Schedule C's).
Form 8869: One more way to report foreign accounts.
Penalties for non-disclosure of certain qualifying foreign accounts are very
steep indeed: Up do $10,000 or more per month.
2011 marked the introduction of new steps toward disclosing to the U.S. Treasury
broader information about your foreign accounts. Qualified accounts are
those in your name or under your control or granted to you by a trust, domiciled
outside the U.S., and containing assets of $10,000 or more anytime during the
year. Traditionally there have been two forms that address these accounts.
Schedule B, Interest and Dividends, Part III of your standard Form 1040 tax return
asks if you have a foreign account or involvement with a foreign trust.
If you, a U.S. citizen, resident OR entity (corporation, partnership, trust,
etc.) have signature authority for a foreign account containing $10,000 or more in assets,
U.S. Treasury Form TD F 90-22.1 Report of Foreign Bank and Financial
Accounts is required for each and every year the account meets those qualifications.
Foreign investments through domestic investment companies are exempt; foreign
broker accounts are not.
NOW, the IRS has added Form 8938 Statement of Specified Foreign Financial
Assets to cover foreign accounts that meet higher
thresholds of assets over $50,000. This form takes a microscopic look at
Note that there are other reporting requirements tailored to the
international jet set:
5471 Information Return of U.S. Persons With Respect to Certain Foreign
- Form 3520 Annual Return to Report Transactions with Foreign Trusts and
Receipts of Certain Foreign Gifts.
Form 1099-Miscellaneous Income: New ways of assuring they are
Traditionally, businesses of any kind have needed to issue Form 1099-Misc to any
individual paid $600 or more for contract services of any type or for rental of
property or equipment. This excludes providers of services from entities
having tax ID's other then Social Security numbers. Now the IRS is asking
in writing whether these 1099's were filed properly, allowing them to enforce
penalties if found otherwise.