Archive for April, 2011

The IRS has extended the deadline for all tax forms and payments that would normally be due on Friday, April 15, 2011 until Monday, April 18, because April 15 (Emancipation Day) is a legal holiday in the District of Columbia (see Notice 2011-17, 2011-10 IRB 540). The extended deadline means that semi-weekly depositors have until April 18 to make their federal payroll tax deposit for amounts withheld between April 9 and April 12. In addition, monthly depositors have until April 18 to deposit their March withholding taxes.

To reflect changes in the employee rate for social security and the elimination of advance payment of the Earned Income Credit*, there have been big changes to form 941, Employer’s QUARTERLY Federal Tax Return.  Form W-2, Wage and Tax Statement, now includes a new code for reporting designated Roth contributions under a governmental section 457(b) plan.

But the IRS will no longer send you forms or instructions in the mail.

With the increased emphasis on e-filing, the IRS has been implementing plans to stop mailing tax packages to business taxpayers. Last fall, the IRS announced it would no longer mail annual income tax returns to businesses. In early March, the IRS added several forms and instructions to the list of discontinued mailings, most notably the Form 941, Employer’s QUARTERLY Federal Tax Return.

*EIC-eligible individuals can claim their credit when they file their 2011 federal income tax returns. Employees who expect to be eligible for the EIC and who will have income tax withheld from their wages in 2011 may reduce their withholding. This option allows those employees to receive a portion of the credit throughout the year.

On April 5, the Senate approved H.R. 4 by a vote of 87-12.  The new law will effectively revert reporting  to the requirements in place before enactment of PPACA and the Small Business Jobs Act of 2010.

H.R. 4, the “Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011” was previously passed by the House on March 3 by a vote of 314-112 and will retroactively repeal the new and unpopular Form 1099 information reporting rules. The White House has indicated that the President will sign H.R. 4 into law. A press release dated April 5 declares that “Small businesses are the engine of our economy and eliminating the 1099 reporting requirement is the right thing to do.”

Before amendment by the Small Business Jobs Act of 2010 (P.L. 111-240) and the Patient Protection and Affordable Care Act (PPACA, P.L. 111-148), Code Sec. 6041 generally required payments totaling at least $600 in a single calendar year to a single recipient to be reported to IRS.

Reporting on Form 1099 was required for payments by businesses in connection with that trade or business. The type of payment that most commonly required to be reported was payment for services. The most notable exception from Code Sec. 6041’s reporting requirements under prior law was payments to corporations (which were exempt under Reg. §1.6041-3(p)(1)).

In the prior legislation scheduled to begin in 2012, Sec. 9006 of PPACA added payments of amounts in consideration for any type of  goods or services—to the list of payments subject to information reporting.

Sec. 9006 of PPACA further provided that payments to non-tax-exempt corporations—which had previously been exempt from the reporting requirement—would be subject to information reporting.

Additionally, for payments made after 2010, the Small Business Jobs Act of 2010 provided that, subject to limited exceptions, a person receiving rental income from real estate would be treated as engaged in the trade or business of renting property for information reporting purposes. In particular, rental income recipients making payments of $600 or more to a service provider (for example, a painter or plumber) in the course of earning rental income would have to provide an information return to the service provider and IRS.

For payments made after Dec. 31, 2011, the new law will repeal the provisions in Sec. 9006 that impose a reporting requirement for payments to corporations and payments for goods or other property. (Code Sec. 6041(a), Code Sec. 6041(i), and Code Sec. 6041(j), as amended by Act Sec. 2)  For payments made after Dec. 31, 2010, the Act also repeals application of the information reporting requirements to recipients of rental income from real estate who are not otherwise considered to be engaged in the trade or business of renting property. (Code Sec. 6041(h), as repealed by Act Sec. 3)