Form 1099 and Form 1099-MISC presented new return filing requirements for tax year 2016: Small businesses or self-employed individuals who received or made payments in 2016 needed to file these new forms with the IRS and the Social Security Administration by January 31, 2017. Do you know if you’re in compliance?
The session will also provide you with the knowledge of properly filing information returns (IRS Forms 1099 and 1099-MISC). The session will also cover, among other things, the backup withholding requirements and misclassification of independent contractors.
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I would like to now introduce our speaker for today, Haleh Naimi. She is a tax and bankruptcy attorney representing individuals and businesses (ranging in size from small to middle-market) in complex tax, bankruptcy and commercial litigation matters throughout California and New York. She has lectured on tax controversy issues involving collection and bankruptcy taxation before thousands of attorneys, CPAs and enrolled agents throughout the nation.
She's a graduate of New York University’s Masters of law in taxation and active member of the Bankruptcy Workouts Task Force of the American Bar Association; a former Vice Chair of the Executive Committee of the California State Bar Taxation Section and has presented multiple tax policy proposals to decision makers at the Treasury Department, Office of Chief Counsel at the IRS, House Ways and Means Committee, Joint Committee on Taxation and Senate Finance Committee in Washington D.C. as well as decisions makers at the Franchise Tax Board in Sacramento, California.
Following the completion of her judicial clerkship with United States Bankruptcy Judge, Arthur M. Greenwald, Ms. Naimi entered private practice with the law firm of Kaye Scholer LLP in New York. After completing her LL.M. in Taxation, she joined the law firm of Hecht Solberg LLP in San Diego, California and later served as inhouse counsel for a private corporation. In her current practice, Ms. Naimi represents businesses and individuals in tax planning and controversy, bankruptcy and commercial litigation. Welcome to the program, we are now ready to begin.
Haleh Naimi: Thank you Amanda, appreciate the introduction. So we are going to be talking about information return filing requirements and updates for 2017 for the 2016 tax year. So thank you for signing up for this event, just by way a background this is maybe the third or four presentation I’ve done, so hopefully I'm improving on managing to hold the phone, so that it has clear reception, turn the pages away from the mic and hopefully present good solid material for you. So I look forward to your feedback.
So we are going to begin – I think one of the hardest issues for employers, for businesses in California and throughout the country is deciding and hopefully having their accounts prepared -- the proper information returns, if not the W-2 form. So when you are employing people for your business, are they employees are they independent contractors, do I need to file an information return and what are the technicalities.
So today’s session is going to be a quite technical and I have a series of Q&As that I'm going to go through that aren’t in the materials that we just -- a little bit – it’s too difficult to put into a PowerPoint presentation, so I thought I would just go through those when we get to the back up with holding requirements for missing and an incurrent name.
And I think that will be helpful, because a lot of people, some of the questions that I’ve been getting from accountants throughout the country, when they call in just for some feedback, and I'm happy to take questions offline. A lot of people hold the information, so if they are under audit, their client is under audit, and they are submitting substantiation docs, I get questions pertaining to the documents, like I gave my documents to the IRS agent, and now I don't have them, and that troubles me, because I would hope everyone maintains good record.
So if your client is under audit and you are submitting documents, please make copies of them, because it’s really hard to know, even if you do a request for the working papers and the documents, after – if you are going to be going to tax court. You still want to make sure that you have those documents at ease at least you have access to them.
So the one thing hopefully you take away from this session, the intricacies of what you need to do to make sure that your information returns are accurately filed, timely filed, both through in terms of electronic filing requirements, paper filing requirements. And ensure that your client is not getting penalised, because the IRS does have a – has its priority, again the worker class, misclassification issues are a big priority for the IRS and the state taxing agencies, particularly in California.
Are they safe throughout the country, I think it’s a good revenue source for the government for the upcoming year, and it’s continuing to crackdown on those workers that are being misclassified. Obviously if you are classified as an employee and you get W-2 income, there is historically been more compliance for those W-2 earners, and the 1099 have not been and so they have -- the IRS has increased penalties and made much more stringent requirements in terms of compliance requirements.
So, thank you for signing up, I think that this is an important – even though it’s a little bit tedious in terms of the technical equipments that the presentation will go through, but I think it’s something very valuable, because I’ve had people ask me what do I do, I'm getting $100 per – I think it was $50 last year, 50 per returns, per information return. And if it’s not timely, and if it’s accurate – your client, those penalties can add up significantly, so I think this is something worthwhile.
So the IRS is going to continue to pursue that the strategic priority for the upcoming year to pursue work of classification issues, if you are not familiar with those, the common law factors. There's about 20 common law factors to determine a worker status, and I’ll go through them, it not in the PowerPoint, it’s – as an aside, I think this is a separate webinar, and in of itself, but I'm just going to tie into this information return before I get into technicalities.
So the IRS revenue ruling 8741 outlines, 20 common law factors and there are essentially control factors that the employer should be -- part of the tax, and what factor should be looked into, and I’ll go through those briefly. Let’s see the first one is, instructions are you as a worker, was required to comply with another person’s instructions, when, where and how he/she produces the work, that would narrowly characteristic of an employee status, and it’s one of the control factors.
Training, how much training is required to that worker and the level of experience that they have and the skill that they have, that would be indicative. So if you have a worker who has the skill-sets independent of the employer, perhaps they are more inclined to be independent contractors and not employees. If you require them, if you require the worker to attend meeting or use other methods, and you are providing that training or service then that’s indicia of employee status.
Integration of the worker services into the business operations, shows that the worker is subject to direction and control of the employer, so that’s indicative of employee status. Services rendered personally, so the service are rendered personally, presumably the person or person for whom the services are performed or interested in the methods used to accomplish the work.
So if they’re provided personally for the employer then one client to be an independent contractor. If they are using the resources of the employer, obviously that is more indicative of employee status. Hiring, supervising and paying assistance, so if the person or persons who’s services are performed, hire, supervise and pay assistance that factor generally shows control over the worker on that job, and it’s more indicative of employee status.
Continuing relationship, if it’s an ongoing relationship, as opposed to may be a six month stint, that’s more indicative of employee status. And not one of these is completely dispositive, obviously it’s a factor test, and so, it’s an all encompassing issues that the IRS determines in an audit. If they have set hours that are established where they come into work, that’s indicative of employee status, full time requirement of the – if the worker has to devote fulltime to the business or the person that’s more considered employee status as opposed to independent contractor.
Lot of times independent contractors, they’ll do a few hours here and then they’ll work for someone else couple of hours during the day and then they’ll come back. So an independent contractor is more hands free, they work more independent of these regular 9 to 5 type jobs, although that alone is not indicative of independent contractor status, because sometimes you can have them in 8 hour shifts for a short period of time and then they move on to the next project.
If you are working at the workers working in the employee’s premises, at their premises, and they are furnished with an office and the material that they need, that’s more indicative as employee. Order sequence status so if a worker perform services in a order or sequence step by a person, the employer who is providing who is providing the status back, that just shows the worker is not free to follow their own pattern of work, and has to follow the employees, employers.
And so that would be indicative of control. Any oral or written reports that are required, so a requirement that the worker submit regular reports to the person, the employer or perform indicates some level of control, degree of control by the employer and that would indicate employers, employee relationships. Payment by the hour, the week or the month, those point to employer-employee relationships as opposed to lump sum payment, commissions, straight commission.
Payment as business and or travelling expenses more indicative of employeremployee as opposed to you front the cost, you do this work, project, and then we’ll reimburse for cost advance. Furnishing of tools and materials, so if there is a computer, if there is a work station, drafting station depending on that type of work that’s furnished by the employer that’s more an employer-employee relationship.
A significant investment, so if the worker invests in facilities that are used by the worker and performing the services and not maintained by the employee, so if they don't have to deal with the office space that’s render out an equipment and maintain that equipment, those factors tend to indicate employer-employee.
If you do have to maintain those facilities, that’s an independent contractor, so I have an office, I provide services for someone else, I have to deal with making sure the rent is paid the utilities are on the computer networking system is on, and not -- that’s a level of control that I exercise over my business as opposed to having someone else do that.
If you realize profit or loss more likely, you are an independent contractor as opposed to employee there is usually a marginal mark up for employees. If there's services -- so that’s more of a financial control, working for more than one firm at a time indicates more of an independent contractor relationship, making services available to the general public on a regular and consistent basis is more of an independent contractor relationship.
A right to discharge, so that’s a little bit of an ambiguous situation, because you can obviously discharge an independent contractor from that project, but it is more of indicative as employer-employee relationship, because of that threat of being discharged is more indicative or level of control that the employer asserts over the employee.
An independent contractor can be fired, they can be discharged from the project or may be – if they don't produce the results that are deliverables, perhaps they wouldn't be retained again, but that’s - it’s not that ongoing threat of being fired is more indicative of employer-employee relationships and then obviously the right to terminate. So the worker has the right to end the relationship for when the services are provided anytime without liability, it’s an employer-employee relationship. Usually on a contractual basis, if you have an independent contractor relationship, there may be penalties in place for leaving the project before the actual time that it takes to do the work.
And the IRS offers -- there is a safe harbour, a Section 530 safe harbour, so if you have employers, who have been consistently in these businesses, when I say employers, if they’ve been consistently treating a worker, another worker is performing similar type work, as non-employees for all periods, and they had a reasonable basis for doing so. And so these are three requirements, they are not disruptive, all three are required and they filed all information returns with 1099miscellaneous returns that we are going to be discussing at length at in this presentation.
Then they might fall into the Section 530 safe harbour, and that’s the federal standard, so you have to be mind full of your state requirements, they might not be parallel and then in California often times with the EDG, there is a divergence. And so you have to be -- depending on the state where you are working, you have to make sure – Amanda: Haleh, this is Amanda, I'm sorry to interrupt, I just want to let you know that your slides are not advancing, are you clicking the next slide? Haleh? Just one moment, we have Haleh back on the line. Haleh are you with us? Sorry about this interruption, I'm just going to get Haleh the speaker back on the line, and then we will continue with the presentation. Haleh are you there?
Haleh Naimi: I'm here. Okay. so for those people that have recently started the presentation and sign -- and join the conference after I started, at the outset of the presentation, I indicated that before I get into that technicalities of the 1099 updates and the nuances involved with the information returns, I'm just going to talk briefly about the distinctions between employer-employee relationships and the independent contractor relationship where 1099-miscellaneous form is required.
I went into the 20 factor – the common law factors and the Safe Harbour Provision under the IRS Section 530 Safe Harbour Provision, so hopefully if you didn’t catch that there, that’s a webinar in and of itself. But I just wanted to highlight some of those distinctions, those control factors that are required, because it is on the IRS’s priority plan to -- really there is billion of dollars for misclassified workers.
And so the IRS is really going after those people to distinguish as is the 1099 information return, a priority IRS, because they are seriously looking to raise revenues, with penalties for late filing and collect filing and the back of withholding requirements. And we’ll get in to those technicalities, those are the materials in the presentation, and so I'm on page two of the webinar of materials that you have.
Hopefully if you have – hopefully there is no confusion, so I was indicating that that’s the federal –
Amanda: Haleh, I'm sorry to interrupt again, but your slides are not advancing on the go to beading platform.
Haleh Naimi: I haven’t advanced it – I'm on page two.
Amanda: Okay. Okay thanks.
Haleh Naimi: Goodbye. So we have a 120 attendees, so if you are sending chats to the moderator, please don't be alarmed, we’re on page two, I have not advanced the slide just yet. So I was just getting into the background at the distinction between employer-employee relationships, and independent contractors, which segues into our information return requirement.
So what is an information return, you have to disclose information to the IRS with the appropriate tax ID numbers and the name, there can't be errors in reporting that information to the IRS. So, if a tax document that’s reported certain types of payments made by financial institutions and others, so when I say others, this is from the IRS material. So others would be anybody engaged in a trade or business, so if you are private party and you are buying something at garage sale don't need to issue a 1099 to them, those are not obviously covered by these information return, so I'm going to go to PowerPoint two.
Question number on, are you there? So you can answer in your chat box in order to get your credit, and I'm going to give 30 seconds to do so. Thank you. Okay. Hopefully everyone was able to answer that question, looks like a 122 attendee. So if you just joined in, please makes sure you answer question one, so that you can get your requisite credit for this webinar.
Okay. So for those attendees who prepare these routinely, whenever you have an information return, you have to submit a summary form 1099 to the IRS and this is just a reminder you must send copies A, of all paper forms to the IRS with the form 1096 the annual summary in transmittal of the information return.
And we’ll get into specification, so for those people that are a little concerned, so W-
2G that’s the gambling winnings, the 3922 form that’s transfers of stock, oops let me go back. 3922 transfers of stock, to employee stock purchase plan. So if you are representing employers that have those 3921 that’s an incentive stock option and then 5.98 IRS contributions for each person you maintain an individual IRS account for.
So I'm going to focus the majority of the topic and the technical details on the 1099s which have updates this year, coming up. You have to report backup withholding on form 1099 and W-2G, what doesn’t that mean? So when I say backup withholding, most people think okay well if I'm a employer and I have an employee I have to withhold, you have to withhold, if you have requested -- you send a W-9 form to the person who performed their services. If they have not provided information that’s necessary for you to complete you 1099, you do have to have, backup withholding requirement.
And we are going to go through a series of question-and –answers that are really helpful in flushing this out, all the nuances of what’s required and what happens if you don't properly submit you’re W-9 and your 1099 receipt – of an error, because the
10 doesn’t match or the name doesn’t match or if your security number doesn’t match. So you’ll see there’ll be notices that are sent and you have to go through a series of steps to correct the 1099.
So the IRS is going to notify a payer, so the payer would be someone who retains the independent contractor, whoever it is, that’s providing me services to begin backup with holding, because of the payee or the recipient. Sorry quickly when you want them to advance they don't, but now they are quickly advancing. The payee is the recipient of the funds who is providing these services.
And just by way of reference -- so what are these services that require the information returns, there would be rents non-employee compensation for services, and that’s why we went through at the outset of the presentation for those who joins later. We went in through the nuances of distinguishing the non-employee compensation for services from employee compensation for services, and often times a situation where the employers is innocently paying someone as an independent contractor, and it should be an employee vice versa, but it’s more likely the reverse situation.
Royalties or other types of payments that require information returns, reportable growth proceed paid to attorneys, for attorney. So you filed the 1099 and we’ll get into the requirements later on in this slides, and so, if you have an S Corp or C Corp as the payee, you don't have to back up withhold, except if they are attorneys. And I've had that situation come up, where I've settled the case, because my law firm is incorporated, I figured, okay, I don't have to deal with this and a W-9 is required of my firm, because I'm an attorney.
And so, that just as a nuance -- if you represent attorneys, or you have clients that deal with attorneys, you need to make sure to get those to them regardless if they are professional corporations. Other fixed or determinable gains, profits or income payments that are reportable on 1099-miscellaneous forms, they have to be reported and you have to deal with this backup withholding requirement.
So there is a 28% withholding requirement, unless there is an exemptions, and the exemption apply, so like mentioned if they are an C Corp or and S Corp or an insurance company there are certain exemptions. But they are very narrow, and we’ll get into the Q&As to flush those out, who would fall into the exemption and who wouldn't.
But there is a 28% withholding and this is just to remind you, this is again for independent contractor, this is not employer-employee withholding this is for information return withholding. And if you don't have the proper pin or the name is incorrect, you need to start withholding to make sure the government gets its funds.
Okay, this is not, okay pin matching allows a payer or authorized agent who is required to file 1099B, 1099 dividends pay and miscellaneous OIDs and RPAT, so when – I have a typo that should be income right here, which report income subject to backup withholding to match 10 and name combinations with the IRS records before submitting the forms.
So your clients have to ensure that they information that’s provided to them in the W-
9 is accurate, it matches the 10 currently, there wasn’t a typo sometimes, they are hand written, and it’s eligible and so it will get kicked back. And we’ll get into what the CP notices, the tininess required and what do clients have to do to comply what you would have to do, to make sure that its incompliance.
Failure to follow the backup withholding can result in penalties to the payer and these are your clients or you for filing an incorrect information returns. The payer may also become liable for any uncollected amounts, so serious penalties, I mean they add up.
So we are on slide nine, what’s the of this webinar, and you have 30 seconds, and I’ll switch the next slide.
Because it’s been a rough week, I just want to give you a hint, it’s on the screen, it’s on my screen, I don't know if it’s on your screen, so hopefully you can get this. It’s been a rough week, I don't know, I was telling Amanda my dog was sick and now I'm having technical problems, so hopefully the rest of this presentation will go well.
Okay. so back to the slide, payments subject to back withholding, so I mentioned rents, non-employee compensation, royalties, growth proceeds, pay to attorneys, these are all things that should put you on alert, that you need to file, this 1099miscellaneous or the 1099 form. And make sure that you deal with backup withholding, okay it doesn’t apply to wages or pension payments.
What does your clients have to do, or perhaps you, if you are responsible for securing these, to secure at 10, so all payees those are the recipients of the funds, you must make an initial solicitation for 10 when the payee opens an account or when the transaction occurs. And you use, and so, you might think I don't know when they didn’t open an account just a contract their providing service.
So look at the transaction, when did it occur, give them W-9, right when it’s finished, you might even want to do it at the outset, request the tax id number right away from
the W-9. I've actually had, the insurance companies, in a litigation sent the wrong fund, they’ll send it to the wrong company. So, if it’s not my client, they’ll send it to me, and I have to deal with it.
So you just have to be very careful, because this is a priority and you don't want to be penalized for someone else’s errors, so keep really good records when you are doing this in the upcoming tax year, because it’s really important. Better to do so now, then to make the mistake later and have to retrack and find your documentation.
So in addition to beginning backup withholding on a payees or the recipient, if the payee continues to fail to provide you with the 10, you have to make annual solicitations, and we’ll get in detail, there are three annual solicitations that you have to make. And here is your CP notices, so the CP 2100 and 2100 A notices are the notices that inform a payers that he/she has -- may be responsible for backup withholding.
This may be due to missing or potentially incorrect 10s, during the processing of a
1099, it’s accompanied by a listing, missing, incorrect and or currently issues payee
10. And they’ll check this on everything that they have from the social security department, their records historically the ten, and if there is one tiny little error, you’ll get that CP notice.
And it’s pertinent for a large fund, so your clients issue 250 or more erroneous documents those are called large volume filers, and they’ll receive 2100 notices and everybody else will receive 2100 A, so it’s just the number of returns that are incorrect. So what is an incorrect ten, whenever the pin is displayed in the proper format, but the name or the pin combination doesn’t match or the pin cannot be found in the files of the IRS and our social security administration.
And sometimes, the social security administration have incorrect information, with your client or whoever that the actual owner, the social security number haven’t updated. So you want to make sure it’s consistent, and so the presentation will get in to the nuances of what you need to do in order to correct it.
And so, now we are on question three, there is a series of six questions, and this is the third one, please take a few minutes or few seconds, answer it. Let me see if I can give you a hint, it’s not on your screen, maybe it’s in your materials, so hopefully you can answer this.
Okay. So hopefully, I gave you enough time, we can go back for the whole presentation and answer some of these I think. I’m going to see what the next slide is, B notices, so you’ll get a B notice. If the IRS sends you a CPE 2100, or 2100 A or your clients about CPE 2100, indicating an incorrect ten, you required to sent B notice within 15 so these – these time requirements are pivotal, don't miss them up. And make sure that you retain evidence that you’ve compiled.
So if you are spending anything, I would sent it certified or proof of mailing, get that receipts, I mean staple it to you records, make sure you have that. They are really good at the IRS of telling you what you need to do to establish reasonable cause, so hopefully, no one will call and say, do I have reasonable calls in this situation, I didn’t keep anything, but I complied, and so that’s going to put you in a really difficult position.
So if someone else has to give you information, and there is a deadline, you need to document every step of the way to protect your client and your firm from liability, from these penalties that can – on the surface that looks like it’s oh it’s a $100, but it will add up per information return.
You begin backup withholding, so you send the B notice within 15 days from the date you received it or the date on the form, whichever is later, calendar it, document it, put it on your cross reference it, you might have a stamp that say received on such date. And if it’s different from the date that you received it then just make a note of it, there just are little nuances that can really protect you and they can add up.
I’ve had accountants call me and they had millions of dollars in penalties, and it was because they just didn’t catch something, it was a tiny, tiny easy error that anyone can make, but it has huge repercussions. So please pay attention to documenting the timing of receipt of everything, you begin backup withholding no later than 30 business day, business day, not calendar days, business days.
After the date, so that’s not considered Saturday, Sunday holidays, and that’s after the date of the notice or the date you received it, whichever is later. Then you stop your backup withholding, so you are withholding 28% for backup withholding, you stop that backup withholding, no later than 30 days after the payee furnishes a 10 and certifies, certifies that is correct, and on the form that they’ll find. Okay so you’ll have evidence of that.
And this is a contact information if you have questions, I haven’t called them, so I can't tell you if it’s a working number, I’ve had hard time with the IRS, their fax number isn’t working, phone number, so priority – I had a client that wanted an employer ID number for and entity formed. And then they wanted the S Corp election and nothing worked.
And so, hopefully things will work for you, and there is the priority outline if you are admitted to for the IRS, you can call them and see if they can help you if these numbers don't work. And this is timing, Monday through Friday eastern time or you can e-mail this e-mail address, if you have questions about these CP notices, you can contact them.
Okay, before I get into fire, these are the electronic filing requirements that are a bit complicated, and by the way if you have, if it is your first year, you are doing it, I would highly recommend getting started with your testing, tested the software and make sure that works as soon as possible. And I’ll give you the dates that their system is going to be down, it started November 1st so last Tuesday, it was available for testing, but it’s going to be down from December 9th through January 2nd. So if you have a January 31st deadline, you have to do it 30 days before for electronic, you want to make sure you do it, this month early, please deal with that.
But before I get into the electronic filing requirements, I want to go back and talk about the Q&As for the backup withholding, and missing information just to make sure we cover all the basis, because it seems straightforward, okay I get this notice, I have this timeline, but there is a better series of questions that the IRS prepared and I think they are really valuable for people that are responsible for this.
So what is the backup withholding? We talked about it, 28% the payments that are excluded, from backup, because we talked about what payments, so we said interest dividends, rents, these commissions, non-employee compensation, those are all subject to backup withholding unless you get that proper 10, and you report it and there is no issues, and you don't have to backup withhold.
Payments that are excluded for backup withholding, so if you have restate transactions, for closures, abandonments, cancel debt, you got a – believe it or not, even though we seem to declining out the recession, I still have clients, because I do bankruptcy reorganizations and liquidations. I still have so many clients with mounting debt, and so there's still a lot of cancelation of debt. There is MSAs, Medical Savings Account distribution, long term benefits, these are all excluded from backup withholding.
And ESOP, so distribution from an ESOP, Employees Stock Ownership Plan, fish purchases for cash and it’s probably, I don't know, may be in Alaska and Washington, Oregon might me more prevalent. Unemployment compensation, state of local income tax refunds, and qualified tuition program earnings, those are not, you don't have to do backup withholdings, for those types of payment structures.
Most people know what a pin is, it’s like a social security number, tax id number, that could be an employer identification number, depending on what kind on entity you have. And it’s similar in structure, but it will have different just like social security has the three digit you’ll see a tax id, mostly accountants know what that is.
And there is a distinction between an individual tax id number and adoption tax Id number, for an adoption tax id number, so if a child is born and adopted in the U.S. they will have an A10 just so you know. If they give you something that says A10, don't be by that. What payments are subject to backup withholding, again I'm emphasising it, because it’s really, really important, rents commission non-employee compensation for services, reportable gross proceeds pay to attorneys, other fixed or determinable gains, profits or income payments reportable on form 1099miscellaneous.
Interest reportable on 1099 interest income, dividends reportable on 1099 dividend in distribution, patronage dividend paid in money or qualified checked reportable on 1099 TATR taxable distributions, received from cooperative original issued discount reportable on fund 1099 LID. So I would suspect, New York and eastern countries, back east back east they have a lot of financial client’s investor clients. OID is a big issues have 1099 OID, 1099 B grows proceeds from broker and broader exchange transactions, gambling winnings so reported on W-2G, those are also subject to backup withholding, growth payments reportable on 1009K payment card and third party network transactions.
So this is a another question, can a payee claim -- here she is exempt, so yes they can, so if you ask them, you submit the W-9 payees who may be exempt or listed in the instruction for the form W-9, they include tax exempt organizations, government agencies, corporations, for certain amounts or certain payments, and other listed entities. So if you have an LLC that’s tax to the corporation that would qualify as a exempt entity.
An LLC taxed as a partnership or a disregarded entity, not so, you do have to have backup withholding and they are not exempt, so be mindful of that. Again attorneys, even though they may be an S Corp, C Corp, professional corporation you need to make sure they get the W-9 and backup withholding, does apply they are not except. Is a payee an exempt corporation, if it uses the term company not necessarily, like I said, attorney for example as one that might have like my firm advocate solutions come at Inc, still not exempt, because of the nature of the work that we do.
One of the 10 consider missing or incorrect, if a digit is missing, if there is an extra digit, if there is an alpha numeric number, like a letter as suppose to just numbers, that would considered missing from payer id numbers, obviously as accountants you all work with these numbers, but there could be an oversight and something could be submitted in error, I'm guessing that’s where most of the problems lie.
What should I do as a payee refuses or neglects to provide at 10? Really good question. Begin backup withholding immediately on any reportable payments do the required annual solicitation request for a pin and we’ll get in there is two annual solicitation requirements. So how do you know if the pin is incorrect, you’ll get the CPE notices as I mentioned in the prior slide, CP2100, 250 of more errors, or CP2100A notice listing the incorrect name on those forms.
Okay. So what should I do if I receive the CP2100 A or 2100 notice, you have to make three solicitations for the ten, the initial, the first annual and the second annual, so there is three. To avoid a penalty for failing to include a pin on the information return. You do not have to call or write the IRS to say that you made the correction or update to your records, you just have to send the B notice to the payee, along with that CP notice that you received and I would definitely send it proof of mailing.
So you’ve got the date on there, if you don't want to up the money for a certified mail, although anything that shows evidence of the date, will help you just keep a file for that. And then, so make sure you send the B notice, if an account does not agree, this could be the result of a recent update to the social security. So even if – let’s say you get that CP notice and the person, the payee keeps sending you the same information, they just haven’t updated the social security records so that could be an explanation.
But that’s your reasonable cause, so make sure you document that properly for clients in you firm, so that you are protected, as the payees, the cause of the problem. What is a B notice? It’s what you get if you have CP notice, this is what you have to send out, it’s a backup withholding notice essentially. There are two B notices, the first B notice and the second B notice.
So you have to send that first B notice and a form W-9 to a payee after you receive your first CP2100 or 2100A notice with respect to the account you are soliciting, if there is an incorrect information, that where you have to do W-9 Cp notice and send you B notice to them. You don't have to send a B notice more than two times within three calendar years to the same account, when you are sending, so remember there is two B notices.
So the second B notice tells the payee to contact the IRS or the social security administration to get their correct pin accurately, the mailing of the second notice should not include W-9. So once you’ve sent the W-9 you are good the first time to them, when do you send the B notice, again time requirements, so you have to send 15 business days from the date of the notice of the CP notice, or the date you received it.
We’ve discussed that in the PowerPoint, so just want to emphasis --repeat these questions, because I think it helps to digest these important deadlines. How do you know, which B notice to send? So if the first CP2100 or 2100A notice, you received with respect to your account, if it is the first time you have received it, you have to provide the payee with the first B notice and a copy of the W-9.
You may also provide an optional reply on not necessary, but if you want to, it’s important and mark it with important tax information, enclosed in bold, caps, red, however you want to identify it, so that it’s not thrown away. If it’s the second CP notice that you received within three calendar years, with respect to the account, you have to provide the payee with a second B notice.
Don't include form W-9, you may provide the optional envelope, but you don't have to – you must provide the second B notice, but you don't have to provide the W-9. So I have to mail a second B notice, if I receive the second CP notice in the same calendar year as the first notice, now you can disregard the CP notice, even if it relates to a different tax year than the first notice.
You also have no obligation to mail a second B notice if you receive the second CP notice in a different calendar year than the first, so both the CP notices relate to the same payee’s accounts for the same calendar year. Okay. What should I do, as a B notice is returned as undeliverable, so if they are anticipating problems for you and that’s why I think these Q&As are really beneficial, if you have to begin backup withholding, I would keep the envelope obviously as record that it was undeliverable.
But the IRS is imposing an extra burden on the payee, if you can't, you have to diligently search for the proper mailing address, the correct mailing address, and remail the notice. So maintain records of doing that, so that you are protecting yourself in your plan. When do I start? So after you receive the CP notice, when do you start and stop backup withholding? That’s a really good question -- you have to begin backup withholding on all reportable payments to the payee, no later than 30 business days after you receive the notice.
You have to stop backup withholding within 30 calendar days after you receive the required certification, that’s on the W-9 form from the payee, or there are 10 validations on the social security or IRS, if it’s the second notice, okay. What are the first and second annual solicitation requirements? So a solicitation is a request for our payees correct ten, okay so you first send them the W-9, they send you the wrong ten, that’s your first solicitation, essentially.
You begin, you must make the request to satisfy the backup withholding requirement and avoid a penalty for filing another information return with a missing or incorrect pin. I'm sorry the payee has to furniture certified pin in the initial solicitation on form W-9 with respect to the payment of interest dividends and amount subject to broker reporting, for other payments the payee may furnish or provide the pin in any manner.
So missing pins, and then I’ll get into incorrect pins in a sec, for missing pins, you must make your initial solicitation, when the payee opens the account or when the transaction occurs, so remember I said when you are hiring someone, not hiring, when you are retaining an independent contractor for services, you are not quite sure. I would do it at the outset, make sure you have all the proper documentation and this is – if you are providing compliance services for your clients, it’s a good protocol to follow best practices.
To avoid a penalty for filing an incorrect information return, you must make a first annual solicitation by December 31st of the year in which the account is opened, so accounts opened before December or January 31st at the following years, the accounts open during the preceding December. If the payee does not provide a pin after the first annual solicitation, you have to make a second annual solicitation by December 31st of the year following the calendar year.
So for 2016 you would make it by next December 31st. For incorrect pins, you must make up to two annual solicitation in response to a CP notice, you have to send a B notice, again 15 days after you received it, if you receive the proposed penalty notice, and that’s a 972 CG, but not a CP notice, you annual solicitation must be made by December 31st of the year you receive the proposed penalty.
Okay. Hopefully - like is said there was a lot of Q&As that I thing really flush this out, and hopefully the balance of them are pretty short. Does a CP notice indicate whether it a first of second? No, so just keep track of them, okay, when you receive them, like I said get one of receipt, stamp if you don't have it. Oops, I think I just switched my PowerPoint. Okay. What is the relationship between the requirements to make and annual solicitation for a payees pin, and their requirements to send a B notice?
So a B notice to payee, as a response to a CP notice and it satisfies the annual solicitation requirements in order to avoid penalties for filing an information return with an incorrect pin. What are accounts, I corrected still on the listing of missing or incorrect pins? Probably because the processing cut-off point, so if you know that an account was corrected, you don't have to send a B notice to the payee.
What should I do if a pin was actually was on file, but was omitted from the 1099 form or reported incorrectly? Make any required change to you record, and use the correct information on future filings. What should I do if this is the first notification in the form W-9 is returned with the same incorrect information? So, yeah that happens, keep the W-9 form on file to show the payee certified the name combination, the pin name combination.
And you don't have to backup withhold, okay, once they certify it on that W-9 form you are good, if I don't do business anymore with the payee or only one time transaction, what should I do with the B notice? Send it and try to get the correct pin, note you records or track the notice for the two in three year rule. You’ll need this information, if you should renew business with that payee, and the IRS requires that you track these accounts for three years after the date of the first CP notice.
Okay. Can a sole proprietor have a social security number or any employer id number? Yeah they can – a sole proprietor to may have social or an employer id number and sometimes they tend to do DBA. So just be mindful of that and same with this regarded entities you look to the tax payer owners, social security number that could be an employer id number as well.
Should I backup withhold on a payee who is a non-resident alien? Of course, obviously if you been watching the political climate, they are definitely looking at raising tax revenue from these non-resident alien transactions that occur, so you need a W-8 BEN, it’s a certificate one status of beneficial owner, a U.S withholding. Can a form W-9 for one account be used to correct all accounts? Yes if the payer required a payee to file only one W-9 for all accounts, or instruments of the payee, you can use one.
Can a payee be subject to backup withholding for more than one reason? Yes. Backup withholding for only one reason, however backup withhold for only one reason at a time, so you can have many reason, but you can only hold this for one. What form do I use to report a backup withholding? Really good question for people that are used to it, doing this report backup withholding on form 945 annual return of withheld federal income tax, and then including the deposit requiems for form 945, even you might withhold it, but make sure you are segregating department correctly, similar to the 941.
How is the name, pin mismatch identified? They have records, so the combo, if there is a mismatch that doesn’t match the IRS or social security administrations files, it will flag it as incorrect pin. What amount is subject to backup withholding with respect to security sales, I don't if there is that many that are done here, but if they are made through the margin accounts, so the amount of subject to backup withholding in the case of the security sales through a margin account is limited, to the amount of cash available for withdrawal by the customer immediately after the settlement of the sale.
The amount available for withdraw by the customer does not include the amounts required to satisfy margin account maintenance. If a margin call forces a customer in to seller, such proceeds are not subjected to backup withholding. And then the last Q&A, whew and what matter should a payer treat erroneously withhold packs? So if a payer withholds from a payee in error or withhold more than the correct amount of the tax obviously, you have put it back, you have to refund the amount and properly withheld.
The refund must be made prior to the end of the calendar year, and prior to the time the payer issues a form 1099, if the payer has not deposited the amount of the tax prior to the time that payer issues a form pin, I'm sorry – if the payer has not deposited or e-mailed tax prior to time that the refund is made, the payer should not deposit the improperly withheld tax.
If the improperly withheld tax has been deposited prior to the time the refund is made, the payer may adjust any subsequent dispositive tax collected, which the payer is required to make by the amount of the tax which is been refunded. So payers may use the refund alternatives only when backup withholding is the result of an error by the payer. So those are some Q&As that the IRS prepared, because they anticipated issues that might arise, with respect to these new updates.
And obviously there are, they are not all news, just the deadline for the 1099, but if you are not a custom tool might think it’s really important to let your staff know about all these deadlines and the protocol you want to implement. So, now we have the electronic filing requirement, anyone with a FIRE transmitter control code, among PowerPoint slide 18, who’s required to submit information returns, except 1094s and 1095s can file electronically through FIRE.
Sounds easy, but there is a whole host of requirements, and if you don't have IT people helping you, there is contact information, but as I said please this is the first time you are doing it, try you test run as soon as possible. So law requires any corporation, partnership employer, state and or trust, who is required to file 250 or more, so not up to 250, so 250 is the bright line test, 250 more information for any calendar year, you have to file electronically.
So I'm general counsel for some college out here, as well as my practise, so they do a lot of those information returns, because of the tuition, so I'm mindful of this requirement, so just – if you think that your clients doesn’t fall within this category just double check historical 1099, or maybe they’ve been underreporting those, you want to make sure their compliant this year.
Moving on, okay the benefits of electronic filing, those benefits and burdens obviously, but some of the benefits of the IRS points to you, their FIRE can accept multi files for the same type of return, you can combine federal and state filing program through this electronic filing, they also have filling form avowable, form 4419, which is the application for filing information return electronically, and form 8809 extension of time to file information retunes and we’ll discuss those at to follow on these slides.
What is the name of your city? That’s question four to this presentation, so I’ll give you 30 seconds to fill that out. Okay, that should be easy enough if you are paying attention I think. How to transmit through FIRE? You have to have the software, or service provider that will create the proper format, have to be in those ASC ASC II, I think format, I'm not a technical pro, so hopefully there won't be a whole lot of questions about the electronic filing requirements, I can tell you the protocol, but I can't tell you how to do it, but I can direct you to where you can get more information.
So a transmitter control code is required, that TCC code required to transmit information returns through the FIRE system, and there is efficient way to submit an application to file information returns just to submit the fill in form, form 4419, submit your application at least 45 days prior to the due date of your information returns. So you’ve got 1099-miscellaneous forms that are due January 31st, because it’s electronic, and I told you that the system, the testing system is going to be down from December 9, this year December 9, through January 2nd, maybe there is a – I guess they are understaffed, skeletal staff may be for the holidays.
And by the way it’s also – there is down time for the testing system as well from like 2 AM to 5AM Eastern Standard Time for updates and things, so you – if you haven’t done it, please do so. So 45 days prior to the due date that would be December 15th, I would think, if I'm doing math in my head correctly. So if you haven’t submitted that form, please do so, ASAP may be after the call, once we get of this call.
You are FIRE TCC will be deleted, if no information returns on file for town consecutive tax years , once it’s deleted from the database, you’ll need to submit anther form, so don't assume that once you file that, it’s good for ever, keep track of that. And if you need to reimplement the application and test and update your program requirements, you’ll have to do that. The form 4419 application is available and I provided a link with an update in box seven and instructions. So box 7 number in the 1099 that’s – well we’ll get into that in a sec, but I just wanted to alert you to the box 7 requirement for the 1099.
In order to file electronically through the FIRE system, you have to have the software or service provider that will create the file in the standard ASC II format, I think that’s ASC II format, scanned or PDF document will not be accepted. And if there is account firm, obviously in house you can handle that.
Okay form 4419 application for FIRE, so if you are a new user and you're required to submit 4419 to follow electronically request authorization to file the information returns with the IRS, you can mail a completed application to the IRS the address is there in West Virginia. Or you can fax it to this number, I wanted to test this fax, before I did this presentations, but it’s been a crazy month so far, a couple of days, it’s been up and down. So please double check, make sure it’s work fax, there is a toll free and a non-toll free fax number on there.
Up on approval a 5 character alpha numeric transmitter code will be assigned to you, so you want to give yourself plenty of time to get that, especially with the holidays coming up. You don't want to risk not getting that TCC code, submit the form at least 30 days before the due date of the returns for current year processing, so that would be – I would do way before that, no wait, if you're in these dates.
Question five, what is your first name, and I’ll give you 30 seconds? Okay, helpfully you’ll get all of your CPE points that you need, I mean credits. Okay to get an extension, so a 30 day extension of time to file information returns, may be submitted by creating and transmitting an electronic file or fill in form on the FIRE productions system or submitting a paper form 8809.
You need an approval letter, it will not be issued for the initial automatic extension request, but for subsequent payers, filer will receive incomplete or deny letters when applicable. So if you are scrambling at the last minute, and you haven’t heard anything after you submitted you form 8809, I think that’s a good thing, but unfortunately they have like this negative notice, so you’ll only get notice if its denied.
And you might -- who knows sometimes it could be overlooked, so just – I would – it says it won't be issued, the approval letter won't be issued for the initial automatic extension, hopefully it won't be oversight on the government’s part, in failing to provide that extension for you. Okay. There is Regs that allow a payers, the filer, an additional 30 day extension of time to file information returns, if the initial 30 day extension was granted and the additional extension is filed before the expiration of the initial 30 day extension.
So if you got hypothetically -- so we’ve got, let’s say 1099-miscellaneous due January 31st for your clients, you submit your request December 29th, which is kind of late, because if you didn’t – if it’s incorrect like I said and you get your denial, then you didn’t get your first. So you’ll receive an incomplete or deny letter when applicable, so you want to make sure you give yourself plenty of time.
So let’s say in this instance, you sit in it and I'm making up from deadline, just to scare people into doing this faster, so if it’s due January 31st, and you do it on – let’s say you file your extension December 1st, you didn’t hear anything great. If the initial extension was granted and the additional extension is filed before the expiration, so you have 30 days, December 30th will be the expiration. So you want to make sure, you get your second extensions request before December 30th in order to satisfy these Regs.
Unfortunately, because of that negative notice, you have no conformation, but if 30 days go by, and you are good, and no one sent you anything then, I would assume that it’s okay to submit a second extension of time. Again if you are doing electronic filing, just make sure that you have access to the system and that you are not penalized, you are not going to get penalized for failing to request the extension, because you didn’t have access electronically.
Generally request for additional time are granted only where it’s shown that the extenuating circumstances prevented filing by the date granted by the first request. And approval letter will not be issued for the additional 30 day extension, so unfortunately again negative notice, so if you request it, and you don't hear anything, that’s good news, it could be news if the IRS is late or it could be news that your extension is granted, but that’s what happens when you have negative notice.
So just going back to this bullet, you have to show extenuating circumstances, and I didn’t know my ignorance of the rules or getting the software in place -- probably wouldn't satisfy. I'm not sure what – obviously there are penalty for filing late, so the penalty is significant, so their request for an extension is really, really important. And I would assume the extenuating circumstance is the factors that pertain to demonstrating extenuating circumstance are less on risk than reasonable cause.
But similar, so you want to show my computer in my office to shut down, we had technical problems provide evidence of that. I think one of the problems that most accountant space is the evidentiary issues, so keeping good documentation of that, whatever circumstances required, if your client was out of the country, because on an emergency, that might. And you didn’t have access to be able to assist you, let’s say they went overseas with their country, and they just could not yet give the information that you needed to file promptly, that would – I would assume satisfying extenuating circumstance.
Obviously a death, a blizzard or hurricane, those types of situation, that would even – cost you reasonable cause, but something outside of your control would satisfy, I assume extenuating circumstance for the approval of the extension. Again knowing these – the penalties in the IRS desire to generate revenue for this priority plan should put you on notice that you need to make sure, you’ll get these done and don't rely on extensions.
The additional 30 day extension request can only be submitted via paper, an electronic additional extension file is no longer an option. So back a mail and I think I have the address in my PowerPoint let me just double check okay that’s not it I think I provided it, if I haven’t I’ll get that for you. Okay waiver from filing electronically so the extension requirement that form that I mention 8809 I believe, 8809 for the extension applies regardless so you can—so if you are submitting it and creating electronic file or so in form on the FIRE production system or submitting a paper form.
So regardless of whether you have to file electronically or you are doing so by paper you can request your pretension it's not pertaining just to this electronic submission requirements. Okay going to the waiver, submit for 8508 different form for the waiver term electronic filing, at least 45 days, so when you see at least do it earlier especially because the holidays are coming, before the due date of the returns, you cannot—you cannot apply for a waiver for more than one tax year at a time if you need a waiver for more than one tax year you must reapply at the appropriate time each year, if you receive an approved waiver do not send a copy of it to the service where you file your paper returns keep the waiver for your records only.
So like I—let me go back and talk about the electronic filing requirement so I have a sheet again to the table with the IRS provided online, and I’ll go through these due dates, so perform 1099 miscellaneous those with Box 7 data and I think I had a PowerPoint flight coming up at, why to be iterate, those with box seven data so the compensation for non employs, electronic filers deadline is January 31st and so that due date if it falls on a Saturday, I forget what I didn’t check my calendar if that falls on a weekend or not.
But if it falls on a Saturday, Sunday or a legal holiday then you go to the next business day, the forms, the 1099 miscellaneous W-2’s and W-3’s with data in Box 7 for non employed compensation are due January 31st, the new due date is effective for tax year 2016 so that’s this year, that’s filed in 2017 applies to paper and electronically filed returns, if you don’t have, so the due date for form 1099miscellaneous with no data in Box 7 that remains at February 28th for paper and March 31st for electronics, so you may not have to request an extension if you don’t have data for Box 7, if you do have data for Box 7 non employ compensation then you have to—then you have much more accelerated timeline and you have to be very, very careful.
And I’ll go through some of these dates because we have some ample time, so 1097BT forms—BTC-forms IRS electronic filing requirement March 31st so the recipient participant copy has to sent on or before the 15th day of the second calendar month after the close of the calendar quarter on or before May 15th, August 15th, November 15th, February 15th the following year. For 1098 those are pretty prevalent, electronic filers deadline March 31st and then the recipient copy, participant I'm sorry, the recipient participant copy January 31st goes to them, the 1099 is just plain old 1099s, electronic filing March 31st the recipient copy January 31st, February 15th performs 1099-B, 1099-S and 1099-miscellaneous if the amounts are reported in boxes 8 or 14, this also applies to statements furnished as part of a consolidated reporting statement.
So I went through the 1099-miscellaneous Box 7 data requirement January 31st for both the recipient participant copy and electronic filing, the 1099-miscellaneous no data in Box 7 has an electronic filing deadline of March 31st, the recipient participant copy goes out January 31st. For form 3921 electronic filing date is March 31st and then the participant copy is January 31st for form 3922 that’s March 31st with a January 31st participant copy.
Form 5498 that’s a May 31st deadline again there is no update, the only update was January 31st probate 1099-miscellaneous Box 7 data but I just wanted to go over these deadlines incase this is the first time filing requirement for you, and you want to make sure you have these dates in place if you need an extension, you know what to do based on the PowerPoint’s, so 5498 May 31st you need to get the participant copy over to them by January 31st for fair market value, retail market data.
On May 31st for contributions, for 5498-SA that’s a May 31st with a May 31st recipient copy, 5498-ESA May 31st with an April 30th deadline for the recipient copy, and then the gambling earnings, the W-2G that’s on March 31st with a January 31st going to the recipient or participant. So these forms are filled on a calendar year basis, let me see if there is anything else I want to say about them, I think that’s it, so these due dates are really important.
Okay so the waiver requirements we went through submit form 8508 at least 45 days before the due date, the return oops, go back you can't apply for a waiver more than one tax year at a time, if you need a waiver for more than one tax year you must reapply the appropriate timing chair, if you received an approved waiver don’t send a copy of it to the service center where you file your paper returns, keep the waiver for your records only okay.
Penalties associated with information returns, oh this is fun, okay so everyone hates penalties because they add up and they’re probably more than the tax in most incidents, tax that would have been due, generally the following penalties apply to the person required to file information returns, the penalties apply to both paper and electronic filers. And even though your client hasn’t received penalties in the past, just remind them that because it's on the priority and they are putting more resources into this area, they might suddenly start to get them so just be forewarned.
So you to file correct information returns by the due date, that’s a section 6721 if you fail to file a correct information return by the due date and you cannot show reasonable cause you may be subject to a penalty, so when we were going through those notices, if you have an incorrect employer ID number, missing information, anything if they mount as incorrect obviously if it doesn’t reconcile with what the payee provided, you are going to be subject, your client is going to be subject to a section 6721.
So you want to get your paperwork together have their bookkeeping records in order, so the amount is consistent with what the payee is providing, other more reason why you need to get the proper information to your payee, if it needs to be corrected, do so before the deadlines. So either furnish the correct payee statement, if you fail to provide the correct payee statement and you can't show a reasonable cause, you may be subject to a penalty, totally different penalty 6722 and they all add up.
So again reasonable cause different than the extenuating circumstances is not just negligence, oops non willful is an error please accept my apologies, remove the penalty, they are not going to do that, so you really need to document your files properly to show it was outside of your control extenuating, and not extenuating, it's obviously you have to show extenuating circumstances but even more I think.
Penalties associated with information returns, if you are required to file electronically but you fail to do so, and you do not have an approved waiver, you may be subject to a penalty of up to 100 per return for failure to file electronically, unless you establish reasonable cause, that’s different than oops, okay so you have your erroneous form that’s a penalty, you should have filed electronically, another penalty, and they are— and one for each return so you can file up to 250 returns on paper, but if you go beyond—250 and more then you are going to file electronically so those are going to be subject to penalty for failure to file electronically.
And like I said, you might not be—I will communicate with the client to make sure, they are fully compiling with the 1099 requirements, because if you do have this Numerosity satisfy this Numerosity issue satisfied and you haven’t filed electronically and you think you’re in compliance because you did a paper filing, you’re going to have an additional penalty per return so that could add up and then with interest on they are pretty stiff though.
The penalty applies separately to original returns and corrected returns, so ouch it's really painful, you want to make sure like I said, your waiver is on, I think that was on negative notice, so you want to document, you requested the waiver and you didn’t hear anything from the IRS, I think it's really unfortunate, that they don’t send out notice but I would suspect this because the staffing is low and they just don’t want to have to be responsible for that, so make sure you stick with the timelines and calendar then, so if you haven’t heard anything you’ve documented, I haven’t heard anything to suggest that I didn’t get the waiver satisfied, if you requested an extension document it to make sure that you satisfied all the time period for the waiver—the extension requirement as well because you are not going to have anything to show that you qualify.
Okay and I went through the new dates for the 1099-miscellaneous information return requirements, the new dates performs W-2G—W-23—W-3 I'm sorry that’s something blocking, and 1099-miscellaneous with data in Box 7 for non employee compensations January 31st, so again be careful of that programming I'm suspecting that a lot of people are going to have difficulty, the FIRE test, the address, the website in order to get more information to have the
FIRE test system, examine so it encourages filers to submit a test file to ensure their hardware and software are compatible with the IRS systems, you can go to http:// that is a backslash, fire.test.IRS.gov and it's available from November first of 2016 to March 17th of 2017 5pm eastern time, the FIRE test systems will be down from 6pm eastern time December 9th 2016 through January 2nd 2017, the system maybe down every Wednesday from 2 am to 5 am eastern standard time.
For programming updates, I guess they put that in there because accountants work so hard and I suspect you are up all night worrying about these issues so they put that little disclaimer in there, form 1042-S testing will be delayed and will begin on January 3rd of 2017 through March 17th of 2017, Fire production system available for electronic submission, so you can test it, and then start submitting it 24 hours a day once your system is compactio with the compatible with the IRS.
They do have available assistance I think they did mention the SSL security requirements are not applied in this FIRE test system I think they are using different software to protect and again I'm not a technical expert, so please don’t ask me any questions about these software requirements or the hardware requirements, they do have assistance for payers, transmitters and employers, there is telephone numbers that I'm going to provide for you, let me check my slide to make sure, that’s just a reminder so if you don’t have to fill in data in Box 7, yeah February 28th for paper and March 31st plenty of time.
Okay retention requirement payers should retain a copy of the information returned or have the ability to reconstruct the data, for at least three years, so this means that it's going to be on their audit and as well, or they’re for shadowing it so be careful, keep all those records that we mentioned in your files for at least three years, some of the reporting due date with the following exception, returns reporting, federal withholdings should be retained for four years, retain a copy of form 1099-C cancelation of debt for at least four years from the due date of the return. And you can keep this information digitally, so your office is in, bombarded with paperwork but if you need to let your clients know, to keep this information for auditing purposes, please do so.
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