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1099 Software: How to efile a test file?

November 24th, 2016 No comments

The IRS FIRE Test System is only available for part of the year.  Testing typically is available from November 1 through mid-March.

You must submit a test file if you are filing for the first time under the Combined Federal/State Filing Program (CFSFP).  You must submit one “Good” test file and then call the IRS at 866-455-7438 x3 and provide your TCC and the successful test file name and they will mark your TCC number as one that can participate in the Combined Federal/State Filing Program.

If you are not efiling under the Combined Federal/State Filing Program, then you don’t have to submit a test file but it is recommended. We submit 100’s of test files each year, many with errors, and we build in the IRS error responses into our software. If our 1099 software shows 0 potential errors, then the structure of the file is acceptable to the IRS and the results typically come back as “Good”.

To submit a test, go to

https://fire.test.irs.gov

Log in.  Click on Send Information Returns and follow the steps on the screen.

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1099 Software: How can I efile replacements?

November 24th, 2016 No comments

A replacement is a new original file.  If you submit a file to the IRS and it comes back as “Bad”, then the file does not exist.  You want to replace the bad file with a new original file.

One frequently asked question is “I put together a new file, there are 0 potential errors, I click Transmit and I see..”

replacement_grayed_out

and the Replacement option is grayed out.  The software can’t automatically transmit a replacement because eventually you have to select which file you want to replace.  To efile a replacement:

  1. Create a new fire.txt file and rename it to be something more descriptive.
  2. Log into fire.irs.gov and click Continue to go to the Main Menu.
  3. At the Main Menu, click on Send Information Returns.
  4. Type in your TCC and EIN for the transmitter.
  5. Verify your transmitter information.
  6. Select file type.  Here you can select Original, Correction or Replacement.  Select Replacement.
  7. At this stage, the IRS site will ask you to select what file you want to replace.  Typically there is only one file.  If you uploaded many originals that came back as “Bad” and you only want to replace one of them, then you need to call the IRS and ask them to delete the other “Bad” originals.
  8. Type in your PIN.
  9. Find and upload the replacement file.

We efile on your behalf.  We do charge for that service.  Just call sales at (480) 460-9311 to get started.

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1099 Software: How can I efile corrections?

November 24th, 2016 No comments

A replacement arises when you electronically submit a file to the IRS and the file comes back as “Bad”.  You put together a new file to replace the bad file that was originally uploaded.

A correction arises when you electronically submit something to the IRS and the file comes back as “Good”. Then later (maybe days, maybe weeks, maybe months) after you have efiled you realize that you transmitted payee data that was erroneous.   You need to paper file or electronically file information returns that correct just the records that were erroneous.

A few comments before we lay out the steps to efiling corrections.

  1. You can only electronically correct payee or recipient data.  The IRS says in Publication 1220 “[i]f an error is discovered in reporting the payer (not recipient) name and/or TIN, the payer should write a letter to the IRS” which explains the payer error in detail.  They also provide a mailing address to where you can mail these types of corrections.
  2. If the file status is “Good, Not Released”, then you have a 10-day window where you can call the IRS and ask them to delete the file before it is released.  You call the IRS at 866-455-7438 x3 and provide your TCC number and the file name and while you are on the phone the IRS agent can delete that file.  You can then Check File Status to verify that the file is deleted.  If the file is deleted in time, you can then efile a new original and this time make sure there are no errors in the file.
  3. If you transmitted a file of 100 records and one (1) of the records has erroneous data, then you put together a correction for just this one record and not resubmit the entire file.
  4. The payer/filer must furnish corrected information returns to the recipient.  You don’t have to re-mail to the recipient but you can if you want to.  You can print out and hand a corrected Copy B to the recipient, fax or email a corrected Copy B to the recipient or just let the recipient know what the change is.

 

If the file status is “Good, Not Released”, then you have a 10-day time-frame where you can call the IRS and ask them to delete the file before it is released.  The IRS phone number is 1-866-455-7438 x3 and you provide your TCC number and the file name and the IRS can pinpoint the file and delete it.  If the file status is “Good, Released”, then you need to efile a correction.

There are 2 types of corrections:  1-step and 2-step correction.

A 1-step correction generally arises when you are correcting a money amount or if the information return should have not been efiled (in which case you are voiding the transaction).  Put together:

  • A file with just the records you are trying to correct
  • Put a check in the corrected box
  • Use the correct money amount or use 0 if you are trying to void a transaction).
  • Transmit as a correction.

The software will automatically update the 1096 (or transmittal summary).

A 2-step correction typically arises when you are correcting a name/TIN of the recipient.  You need to put together 2-files of just the records that you are trying to correct.  The first file has the original incorrect payee name and/or TIN that you transmitted, the money amounts set to 0 and the corrected box checked.  This first step essentially voids the original transaction.  The second file has the correct payee name/TIN, the correct money amounts, and the corrected box checked.  You then upload both the 1st and 2nd step as corrections.

We can efile corrections on your behalf.  We do charge for that service. Just email us at info@1099fire.com or call our sales office at (480) 460-9311 and they can get you started.

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1099 Software : How can I efile originals?

November 24th, 2016 No comments

An original file is data that has never been transmitted to the IRS before.  The steps to efiling are below:

  1. Import in your data and then click “File Information Returns Electronically”.
  2. Fill out all of the fields on this screen and hit the Save button so you dont have to fill it out again.
  3. Click Create.  If the software show 0 potential errors, you can efile by clicking on Transmit.

And that’s it.  You can also manually upload the file by going to the site fire.irs.gov and log in and click on Send Information Returns.  There you will have the option to upload the fire.txt file that the software created.

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What’s New in Tax Year 2016

August 21st, 2016 No comments

New filing date.

IRS Form 1099-MISC must be electronically filed on or before January 31, 2017 if you are reporting non-employee compensation in Box 7.  You have to print and mail Copy B to the recipient AND electronically transmit your data to the IRS by January 31, 2017 which is a very quick deadline.

If you report data on any other box such as rents (Box 1), royalties (Box 2), other income (Box 3) for IRS Form 1099-MISC, you must print and mail Copy B to the recipient by January 31 but you can paper file by February 28, 2017 or electronically file by March 31, 2017.  The original due dates still apply if you are not reporting data in Box 7.

Extended due dates for certain forms.

Copy B must be printed and mailed by January 31, 2017 which this year lies on a Tuesday.  Forms 1099-B, 1099-S and 1099-MISC (if amounts are reported in Box 8 – Substitute payments in lieu of dividends or interest or Box 14 – Gross proceeds paid to an attorney can be printed and mailed by February 15, 2017.


New Forms 1099-QA and 5498-QA
.

ABLE stands for Achieving a Better Life Experience.  The ABLE Act signed in 2014 allows disabled individuals (and their families) to create tax-advantaged accounts to save for education, housing and transportation.  The purpose of an ABLE savings account is to support individuals with disabilities to maintain health, independence and quality of life.

IRS Form 1099-QA reports Distributions From ABLE Accounts.  IRS Form 5498-QA reports ABLE Account Contribution Information.   Both forms are new, required forms for tax year 2016.  Forms 1099-QA and 5498-QA can be filed on paper only, regardless of the number of returns.

New Online fillable forms.

The following information returns:

1099-CAP, Changes in Corporate Control and Capital Structure
1099-LTC, Long-Term Care and Accelerated Death Benefits
1099-SA, Distributions From an HSA, Archer MSA, or Medicare Advantage MSA
5498-ESA, Coverdell ESA Contribution Information
5498-SA, HSA, Archer MSA, or Medicare Advantage MSA Information

are now, free, fillable PDF forms.  You can use the fillable PDF to print Copy B and mail to the recipients.  You can print and mail a black and white Copy A with Form 1096 (the 1096 still has to be on red-ink) to the IRS.  You can must electronically file these forms if you are filing 250 or more of a form type per year.

 

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New filing date for IRS Form 1099-MISC

June 13th, 2016 No comments

IRS Form 1099-MISC is Miscellaneous Income. IRS Form 1099-MISC is most commonly used by payers to report payments made in the course of a trade or business to others for services.

Starting January 1, 2017 (tax year 2016), you must print, mail Copy B to the recipients and paper and/or electronically file 1099-MISC by January 31, 2017 if you are reporting non-employee compensation payments in Box 7.  If you are reporting data in any other box other than Box 7, you can paper file by February 28 or electronically file by March 31 which are the original due dates.  You still have to print and mail Copy by January 31.

These new dates were passed in Public Law 114-113, Division Q, Section 201 which is listed below:

SEC. 201. MODIFICATION OF FILING DATES OF RETURNS AND STATEMENTS RELATING TO EMPLOYEE WAGE INFORMATION AND NONEMPLOYEE COMPENSATION TO IMPROVE COMPLIANCE.
(c) RETURNS AND STATEMENTS RELATING TO EMPLOYEE WAGE INFORMATION AND NONEMPLOYEE COMPENSATION.—Forms W–2 and W–3 and any returns or statements required by the Secretary to report nonemployee compensation shall be filed on or before January 31 of the year following the calendar year to which such returns relate.

If you utilize Box 7 Non-Employee Compensation, you have to be aware of this change and be ready this January.

1099FIRE can help.  We can import, print, mail and efile on or before the January 31, 2017 deadline. Email (info@1099fire.com) or call our sales office at (480) 460-9311 for more information on how we can help you meet this new deadline.

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NEW IRS Form 1098 for Tax Year 2016

May 23rd, 2016 No comments

The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (P.L. 114-41) was signed by President Obama on July 31. The Act includes additional reporting requirements for mortgage servicers starting in tax year 2016.

The new IRS Form 1098 Mortgage Interest is here

https://www.irs.gov/pub/irs-pdf/f1098.pdf

For forms 1098 issued to payers after December 31, 2016, you must report:

Box 2. Outstanding mortgage principal as of January 1, 2016

Box 3. Mortgage origination date.

Box 8. Address of property securing mortage

Box 9. If property securing mortgage has no address, below is the description of the property

 

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How to Transmit Replacement Files through IRS FIRE System

April 6th, 2016 2 comments

You uploaded a file through the IRS FIRE System and it came back as BAD.  You need to submit a replacement.  In the 1099FIRE software, there is an option to transmit Originals and Corrections but Replacement is grayed out?  Why?  And how do I transmit a replacement file?

Replacement files require one extra step and that is you have find the file you want to replace.  The software can’t find it; only the end-user can. That is why the 1099FIRE software doesn’t have the option to submit replacements.  So to efile replacements, you have to manually log into the IRS FIRE System and upload them.  The steps are here:

1.  Create a new fire.txt file and double check to make sure this file looks good.  If the software says there are ‘0 potential errors’, then its most likely ready to efile.

2. Go to the site fire.irs.gov and log in.  Go to the main menu and click on Send Information Returns.

3. Follow those screens.  The first screen asks to the TCC and EIN.  The next screen asks you to verify your information.  The third screen asks you whether this is an original, correction or replacement.  Select Replacement.  The IRS site then asks what file do you want to replace.  There is probably one file listed and you select that file.  Then you enter your PIN and you get to the screen to browse to find your file.

4. When you hit Create in the 1099FIRE software, the software created a fire.txt file on the C: drive, FIRE folder, 1099 subfolder.  Find that fire.txt file and upload it.

That’s it.  Wait 2-4 days for the results to come back.

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Trade Preferences Extension Act of 2015

July 16th, 2015 No comments

The Trade Preferences Extension Act of 2015 extends a trade agreement with sub-Saharan African countries and prevents trade partners from undercutting United States businesses with artificially low prices.

Deep within this bill are new penalties for failure to file correct information returns and failure to provide Copy B to recipients.

The text from the “Trade Preferences Extension Act of 2015” that applies to information returns is below:

SEC. 806. PENALTY FOR FAILURE TO FILE CORRECT INFORMATION RETURNS AND PROVIDE PAYEE STATEMENTS.

(a) In general.-Section 6721(a)(1) of the Internal Revenue Code of 1986 is amended-

(1) by striking “$100” and inserting “$250”; and

(2) by striking “$1,500,000” and inserting “$3,000,000”.

(b) Reduction where correction in specified period.-

(1) CORRECTION WITHIN 30 DAYS.-Section 6721(b)(1) of such Code is amended-

(A) by striking “$30” and inserting “$50”;

(B) by striking “$100” and inserting “$250”; and

(C) by striking “$250,000” and inserting “$500,000”.

(2) FAILURES CORRECTED ON OR BEFORE AUGUST 1.-Section 6721(b)(2) of such Code is amended-

(A) by striking “$60” and inserting “$100”;

(B) by striking “$100” (prior to amendment by subparagraph (A)) and inserting “$250”; and

(C) by striking “$500,000” and inserting “$1,500,000”.

(c) Lower limitation for persons with gross receipts of not more than $5,000,000.-Section 6721(d)(1) of such Code is amended-

(1) in subparagraph (A)-

(A) by striking “$500,000” and inserting “$1,000,000”; and

(B) by striking “$1,500,000” and inserting “$3,000,000”;

(2) in subparagraph (B)-

(A) by striking “$75,000” and inserting “$175,000”; and

(B) by striking “$250,000” and inserting “$500,000”; and

(3) in subparagraph (C)-

(A) by striking “$200,000” and inserting “$500,000”; and

(B) by striking “$500,000” (prior to amendment by subparagraph (A)) and inserting “$1,500,000”.

(d) Penalty in case of intentional disregard.-Section 6721(e) of such Code is amended-

(1) by striking “$250” in paragraph (2) and inserting “$500”; and

(2) by striking “$1,500,000” in paragraph (3)(A) and inserting “$3,000,000”.

(e) Failure To furnish correct payee statements.-

(1) IN GENERAL.-Section 6722(a)(1) of such Code is amended-

(A) by striking “$100” and inserting “$250”; and

(B) by striking “$1,500,000” and inserting “$3,000,000”.

(2) REDUCTION WHERE CORRECTION IN SPECIFIED PERIOD.-

(A) CORRECTION WITHIN 30 DAYS.-Section 6722(b)(1) of such Code is amended-

(i) by striking “$30” and inserting “$50”;

(ii) by striking “$100” and inserting “$250”; and

(iii) by striking “$250,000” and inserting “$500,000”.

(B) FAILURES CORRECTED ON OR BEFORE AUGUST 1.-Section 6722(b)(2) of such Code is amended-

(i) by striking “$60” and inserting “$100”;

(ii) by striking “$100” (prior to amendment by clause (i)) and inserting “$250”; and

(iii) by striking “$500,000” and inserting “$1,500,000”.

(3) LOWER LIMITATION FOR PERSONS WITH GROSS RECEIPTS OF NOT MORE THAN $5,000,000.-Section 6722(d)(1) of such Code is amended-

(A) in subparagraph (A)-

(i) by striking “$500,000” and inserting “$1,000,000”; and

(ii) by striking “$1,500,000” and inserting “$3,000,000”;

(B) in subparagraph (B)-

(i) by striking “$75,000” and inserting “$175,000”; and

(ii) by striking “$250,000” and inserting “$500,000”; and

(C) in subparagraph (C)-

(i) by striking “$200,000” and inserting “$500,000”; and

(ii) by striking “$500,000” (prior to amendment by subparagraph (A)) and inserting “$1,500,000”.

(4) PENALTY IN CASE OF INTENTIONAL DISREGARD.-Section 6722(e) of such Code is amended-

(A) by striking “$250” in paragraph (2) and inserting “$500”; and

(B) by striking “$1,500,000” in paragraph (3)(A) and inserting “$3,000,000”.

(f) Effective date.-The amendments made by this section shall apply with respect to returns and statements required to be filed after December 31, 2015.

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1099-R: Distributions From Retirement Plans

November 12th, 2014 No comments

Form 1099-R is an informational form used by financial institutions to report distributions of more than $10 to account holders from a variety of sources including:

  • Pensions and annuities
  • Profit sharing and retirement plans
  • IRA’s
  • Insurance contracts

Most of these distributions are from some type of retirement plan or fund, and there are differences in the tax treatment of these plans.  For many retirees, distributions are mandatory after a certain age, and these amounts will need to be reported on Form 1040 as taxable income.  The amounts listed on 1099-R are for inclusion on one’s income tax form, and the form is submitted to the IRS with a copy to the taxpayer.

The reason they are taxable is that most amounts placed in an IRA or retirement plan are deductible from income for that year, and will now be subject to tax upon withdrawal in the current tax year.  There are exceptions such as withdrawals from a qualified Roth IRA, so it is important to get sound tax advice on the tax ability of distributions.

Form 1099-R resembles other 1099 forms on the left hand side with boxes for the payer, recipient, addresses and tax identification numbers.  There is also a space for the recipient’s account number.

On the right hand side the important and most frequently used boxes include

Box 1 contains the Gross Distribution before withholding or taxes, and Box 2 lists the amount that is taxable.  If the distribution was a rollover to another account then this amount would be zero.

Box 4 contains the amount of federal income tax withheld by the payer.

Box 7 lists the distribution code for the type of distribution, such as normal, early, death, disability and Roth payments.  There is also a check box for any distributions that are IRA/SEP or SIMPLE plans.

Boxes 12-17 are for reporting state and local income taxes.

It is important to check the accuracy of the distribution amounts on form 1099-R since they may be taxable for the recipient.

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