Looking for an introduction to tax information reporting? Interested in learning best practices from the experts to apply to your own reporting processes?

Join this webinar to learn everything you need to know about the more common form types, details about reporting to the IRS and directly to the states, and some tips & best practices for ensuring information is issued & filed by due dates.

Topics will include:

Beginners should join this session to learn the basics of Form 1099 reporting. This webinar can also be used by managers to train your employees on 1099 basics & best practices.

Many NetSuite users are unaware of capabilities within their ERP that could help reduce the risk and burden around organizational compliance.

Natively built on the NetSuite platform, SuiteTax simplifies your basic tax processes by integrating tax calculations within the same system you already use for sales, billing, payment processing and other core business transactions. The additional SuiteTax API layer allows you to connect multiple tax engines and define separate nexuses for each subsidiary, as well as connections for other compliance tools related to EU VAT reporting, 1099 compliance and sales tax filings.

In this event, you will hear from NetSuite’s Director of SuiteTax and get a better understanding of how Sovos’ Built for NetSuite tools seamlessly integrate with your NetSuite environment to ease the burden of global tax. In product-specific breakout rooms, you can also see the integrations in action.

Full Agenda:

10:30 a.m. – 11:15 a.m. EST: Opening Session

11:15 a.m. – 11:45 a.m. EST: Product Line Breakouts

In these breakouts, you will see the Sovos tools at work within NetSuite and how to use that data for reporting to government agencies or in tandem with other Sovos solutions.

11:40 a.m. – 12 p.m. EST: Open Q&A

Join the experts from Sovos and Delaware Department of State for our webinar on Delaware’s VDA Program. Topics will include:

VIEW ON DEMAND

Tax information reporting for financial institutions presents unique challenges and details to keep in mind when reporting specifics related to 1099 and Unclaimed Property. Incorrect or incomplete reports can make your business a target for audits, costly fines and other penalties. Join the Sovos experts to learn about challenges in tax information reporting, specific to financial institutions. Topics will include:

The Minnesota Department of Revenue recently updated Form W-4MNP, Withholding Certificate for Pension and Annuity Payments. This form is used by distribution recipients to report taxpayer information and exemptions to the payors, who use the information for withholding tax purposes.

While the form and payee instructions saw minor updates, the payor instructions saw substantial changes. Specifically, a table was added instructing payors on how to withhold on non-periodic distributions, and the requirement to file completed W-4MNP with the Department (in the case of 10 or more exemptions) was removed.

To review this form in its entirety please click here to visit the Department of Revenue online.

The Utah State Tax Commission recently published an updated version of Publication 14, Withholding Tax Guide. This publication provides guidance and information for taxpayers relative to withholding tax payment and reporting, along with W-2 and 1099 reporting information. Note that this most recent release is effective as of January 1, 2023; the version effective for the remainder of calendar year 2022 is still posted on the State Tax Commission website here.

The only substantive update in the latest version of the publication involves withholding exemptions for nonresident employees temporarily working in Utah. The updated guide provides exemption information for these nonresident employees and describes when said exemptions do and do not apply.

To review this publication in its entirety, click here to visit the State Tax Commission online.

The IRS recently released a revision to Publication 1586, Reasonable Cause Regulations and Requirements for Missing and Incorrect Name/TINs. There were minor grammar and punctuation changes as well as updates to revision date and years. Additionally, the following notable changes were made:

·         Penalty rate tables updated to reflect new rates, including annual inflation adjustments

·         New Form W-4R may be used for annual solicitation.

To view the updated publication, click here.

Publication 1179 was updated for 2022. Publication 1179 is the general rules and specifications for substitute Forms 1096-1098-1099, 5498, and certain other information returns. In addition to updates in year, bulletin number, and slight wording changes, the Publication also incorporates changes made to individual forms for 2022. There were no substantial updates to the publication itself.

 

To view the Publication, click here.

Tax Reporting for Nonemployee Withholding

What you need to know about reporting nonemployee compensation 

For over 100 years, the IRS has looked for ways to get third parties to report nonemployee compensation payments. But that has become increasingly complicated, especially with the rise of the independent contractor workforce. Additionally, there are disparate federal and state reporting obligations, the thresholds for reporting requirements have lowered and there are other tax reporting requirement changes yet to happen. 

Typically, when taxpayers are not W-2 workers, they receive their income from independent sources. This means that the taxpayer could receive a 1099-MISC, a 1099-NEC or a 1099-K (instead of the W-2 that full-time employees receive). Depending on what was paid and how it was paid will determine which of those forms the taxpayer receives.

How can a business stay compliant with all nonemployee withholding and reporting requirements? What determines the type(s) of form that individuals receive?  

Download the white paper

This white paper highlights key points in tax reporting for nonemployees, specifically as it relates to the 1099 forms, including:

What are the differences between Forms 1099-NEC, 1099-K and 1099-MISC?

  • What does each one mean?
  • When would you need to report those forms? 

The rise of the gig economy 

  • How has this contributed to the tax gap?
  • Why this led to a lowered 1099-K reporting threshold – and what that means for your business.
  • Which states follow the federal reporting threshold? Which ones differ? 

Common reporting issues 

  • Gross amounts v. net amounts – see examples of how to meet all requirements.
  • Understanding attorney payments and exempt recipients. When must you issue a 1099? Which form is required? 

Backup withholding enforcement 

  • Reports from the Treasury Inspector General for Tax Administration led to recommendations that the IRS create a process to identify and enforce backup withholding.
  • The IRS has not previously strongly enforced backup withholding, but it is creating a significant tax gap.
  • How much money has not been reported? What does that mean for you? 

Tax and regulatory reporting compliance grows increasingly digital. Businesses of all sizes and across all industries are impacted. Disparate federal and state reporting obligations, lower thresholds for 1099 reporting and future tax reporting changes can all impact compliance requirements for companies. Once you understand the organizational costs associated with ever-changing tax reporting needs, it can help ensure proper management of delivering all necessary information to recipients, the IRS and states. Our white paper can help clarify the confusion and provide thorough explanation to what your business must do to maintain compliance.

North Carolina recently released a notice which details a temporary reduction in the penalties for late tax payments to the state. According to the notice which was officially released June 30, 2022, the 2021 General Assembly enacted legislation to change the calculation of the penalty from the flat rate of ten percent (10%) to a graduated rate, which was supposed to take effect for taxes on or after July 1, 2022.

On June 29, 2022, the Governor signed Session Law 2022-13, which had several effects: The 10% rate is to continue through December 2022; the Penalty rate will be temporarily reduced to five percent (5%) from January 2023 to June 2024; the graduated penalty rate will be reintroduced in July 2024.

To view the full notice, click here.

Illinois recently released updates to both Publication 130 and Publication 131. Respectively, these publications are “Who is Required to Withhold Illinois Income Tax” and “Withholding Income Tax Payment and Filing Requirements,” the two primary withholding tax publications for Illinois. Both publications had several minor stylistic updates. Both Publications have a revision date of 6/22 and both have been updated with the proper 2022 filing dates for withholding tax.

The most notable update is that both publications contained specific notation regarding the addition of sports wagering as a form of gambling that requires state withholding for winnings over $1,000.

 

To view the complete Publication 130, click here.

To view the complete Publication 131, click here.

The IRS recently released an update to the 2022 Publication 5165. This publication contains the specifications for electronic filing of Federal Affordable Care Act forms in the AIR system. This update for the 2022 filing season is purely cosmetic in nature and contains no actual changes to the substantive information contained within the publication itself. The previous update was in November 2021. This update’s official release date is June 2022.

To view the full publication, click here.

Join Sovos’ tax and regulatory reporting experts to learn about what the changing workforce means for your business and its tax obligations, how you can prepare for continuing workforce changes and solutions and best practices for compliance.

 Topics will include:

The increase in remote and independent workers and companies looking to contract with them continues to grow with no sign of returning to the pre-pandemic norm. Because of this, companies and workers are experiencing new tax regulations they are unfamiliar with, leading to gaps in reporting and compliance.

California recently introduced two new questions to their state income tax forms regarding unclaimed property compliance; Has the company ever filed unclaimed property reports with the state of California and if yes, how much? Based on what we know today, we’re anticipating that California will use the information garnered through the responses to identify organizations that may appear to be out of compliance. They may also use this information to help drive participation in a new voluntary compliance program that is currently making its way through the California state legislature.

At this time, we recommend that you review your unclaimed property policies and procedures to confirm that they are comprehensive and reflective of current operations. This will help to ensure that your company is prepared in the event that California conducts an outreach campaign to companies to further gauge compliance. Other states use similar efforts and frequently request copies of an organization’s unclaimed property policies and procedures. Having strong policies and procedures in place helps to demonstrate that a company is in compliance with California’s requirements.

Join instructors Kent Quam and Sarah Stubbs as they discuss the live upcoming CPE Week in Orlando this November.  They’ll cover what courses are being offered to help you figure out which one is right for you.  They’ll talk about the benefits of live training and why you don’t want to miss this event.  As an added benefit, webinar participants will even walk away with a special registration offer!  We look forward to seeing you in the classroom.

Register Now

Last summer, the IRS released Proposed Regulations amending the rules for filing electronically for a variety of business income tax returns, information returns, registration statements, disclosure statements and more. These regulations were proposed in conjunction with the Taxpayer First Act of 2019, which required the IRS to focus on increasing electronic return filing.

The implementation of these changes would have impacted returns filed for the 2021 season and beyond, however, the final regulations were never published.

Form 1042 is in scope

The proposed regulations seek to amend several sections of the internal revenue code, including § 301.6011-15, which describes the requirements for when a withholding agent needs to file Form 1042 Annual Withholding Tax Return for U.S. Source Income of Foreign Persons electronically.

The IRS verifies the amount of withholding reported on Form 1042 and paid over to the IRS during the year against the amounts reported as withheld on the corresponding Form 1042-S Foreign Persons’ U.S. Source Income Subject to Withholding. Form 1042-S is already required to be filed electronically by financial institutions or by non-financial companies when they issue at least 250 returns for the calendar year. But Form 1042 is not required to be electronically filed. The timing delay between paper Form 1042 and electronically filed Forms 1042-S by a withholding agent can create accuracy issues for the IRS in processing refunds and credits claimed by foreign persons.

Electronic filing required for 2022?

While the regulations are not yet final, the IRS did communicate to software filers at a recent conference that the Form 1042 and Schedule Q (Form 1042) Tax Liability of Qualified Derivatives Dealer (QDD) will be added to the Modernized eFile (MeF) system in January.

So, while it is not yet required to file Form 1042 electronically, the IRS is taking a huge step forward by making the form available for electronic submission.

What about Forms 945, 941?

While far more voluminous than Form 1042, these withholding tax returns were not included in the scope of the proposed regulations.

The Form 945 Annual Return of Withheld Federal Income Tax is used for businesses to report taxes withheld related to pension and annuity payments, gambling winnings, backup withholding and other types of non-wage related withholding. Form 941 Employer’s Quarterly Tax Return reports federal income tax withholding applied to employee wages.

In her recent testimony before congress, Taxpayer Advocate Erin M. Collins reported that as of the end of 2021, the IRS was backlogged with more than 2 million employer paper filed quarterly 941 and 941-x amended forms. Given the IRS’ goal to improve accuracy in return processing and minimize paper returns as mandated by the TFA, it is surprising that these forms were not in scope in the proposed regulations.

Even if the regulations are not finalized for the 2022 tax season, efiling is faster and more efficient than filing paper returns. Efiling makes compliance with reporting to the IRS easier by eliminating the errors associated with manual processes – including the headaches associated with downstream penalty notices that seem to take forever to get resolved.

Take Action

Ready to learn more about common issues organizations face during year-end 1099 reporting? Download our white paper to see how to avoid common challenges.

By: Laurie Andrews and Paola Narez 

Picture this: you just completed a risk assessment on your unclaimed property processes, and you feel like you have this whole unclaimed property thing figured out. You enhanced your systems to make sure you are reviewing every property type and analyzing it the right way, but you have discovered a few pockets of past due property. You are contemplating enrolling in a few of the states’ programs to voluntarily report what you have identified through one of their voluntary disclosure agreements (VDAs), but before you have a chance to enroll, your CEO receives an audit notice. And then another one. And then another one. Suddenly, you are under a multi-state audit by a third-party audit firm that collects a contingency fee on its audit findings. Now what?

Facing unclaimed property audits

First, you concentrate on the audit at hand. Compliance in other states where you have identified past-due property is going to have to go on the backburner. After all, you are just a small department that handles unclaimed property, and it is not even your main job. You only moonlight as an unclaimed property professional.

The audit is going full-steam ahead and you feel like you are knee-deep in audit requests. Suddenly, you hear a rumor that the CEO got an audit notice from another state, but this one is different. It lists another third-party audit firm. This auditor contacts you and says there is more than one state participating in the audit and you should expect more audit notices from additional states.

What do you do? What can you do? State statutes provide states and their associated third-party audit firms with the right to examine the books and records of a holder for compliance with the state’s unclaimed property laws. States can also hire someone to do it on their behalf.

An unclaimed property examination typically begins with an official Notice of Examination letter from the participating state(s) followed by an introductory call and a document request to determine which entities should be included in the review and which years are in the audit scope. The volume of documents requested can be large, with many of them often unnecessary to confirm compliance. It is therefore important to use discretion in what you provide to auditors as you do not want to overshare records.

Audit requests can vary greatly between audit firms, and while you may be able to provide similar information to both firms, such as corporate organizational structure, there needs to be a careful review of other information being provided to auditors. This ensures that information not related to the scope of the audit is not shared (e.g., information from non-audit states or information related to states being audited by the other third-party auditor).

Here are some best practices when managing one (or many) audits:

  1. Execute a non-disclosure agreement with the auditor.
  2. Review each state’s official Notice of Examination letter and pay close attention to the entity or entities listed in the letter, property types, deadlines, review period and any other special instructions from the state (if listed).
  3. Provide information related to the scope of the audit and for years where records are complete and researchable.
  4. Designate a centralized, internal team to handle the audit. Engage the appropriate parties and support teams in your company to assist with this (legal, compliance and information technology).
  5. Set up a tracking sheet to carefully monitor the participating states, audit requests, dates of requests, dates information and documents were delivered to auditors, etc.
  6. Transmit data and documents through a secure portal. Ideally, the secure portal you use will time stamp and record a history of productions to the auditor.
  7. Look into a third-party advocate experienced in supporting audits (like Sovos) and if there are legal issues, consider engaging outside counsel. An advocate and/or legal counsel may be able to identify industry-specific legal defense issues to help mitigate the audit.
  8. Obtain closing agreements and verify it includes all in scope entities, property types and years reviewed.

Unfortunately, multi-state audits are not uncommon. If not managed appropriately, they can be extremely difficult as they require extensive work and will likely be a multiyear endeavor. Therefore, it is crucial to remain compliant, keep good document retention and develop effective policies and procedures. States employ a variety of tools to ensure unclaimed property compliance and they are becoming increasingly active in their enforcement efforts. Unclaimed property audits can seem overwhelming, but they are not insurmountable when you have the right tools and partners in place.

Take Action

Learn how Sovos Unclaimed Property Consulting solutions can help you meet your compliance needs. Talk to an expert.

If you were unable to join us on our recent webinar discussing Sovos Education Services and all the resources we offer, don’t worry.  Read on to find out what you missed.

Booke Seminars is now Sovos Education

Many of you are likely familiar with Booke Seminars – the longstanding provider of insurance accounting education. Booke has been a trusted partner in the insurance industry for almost 60 years when it comes to continuing education and statutory compliance software. But did you know that Booke has been undergoing a transformation during the past two and a half years? Booke Seminars is now Sovos Education after an acquisition that took place back in February 2020.

The importance of education

More than just our name changed over the course of the pandemic. Companies work differently, with many people still utilizing remote or work-from-home spaces. We communicate differently with video calling and a greater reliance on chat apps and email. This also means that the way we learn and the way we teach has had to adapt. Not just the delivery of continuing education, but any on-the-job skills training starting with the onboarding of new employees. As employees interact less frequently simply because of geographic distances, the reality that decisions will be made without sufficient vetting will lead to a greater likelihood of error and misinformation. Unless, of course, those employees participate in training on a regular cadence, which can minimize the risk of such error.

Regular training is key, especially in niche industries like insurance accounting or unclaimed property, where specialization and expertise are hard to come by. Sovos Education has an entire catalog of courses to address various topics in that regard, such as Insurance Accounting and Financial Reporting and Federal Income Taxation of Insurance Companies. Continuous quality education aims to advance the knowledge of the participant with comprehensive examples and interactivity that we have built into our webinars and seminars. Knowledgeable employees are empowered with tools and decision-making skills to help them to grow and thrive in their careers.

Why Sovos Education?

By attending our courses, you’ll be immersed in the details of whichever content area you have chosen. For instructional purposes, we have developed comprehensive model insurance companies that we leverage as teaching aids in nearly every single one of our insurance specific classes. You will also receive insurance-focused textbooks as an accompaniment to our detailed presentations.

Sovos Education maintains the Annual Statement Handbook that was the very first Booke deliverable back in the early 1960s – a resource that is revised in real time as statutory accounting and reporting changes are adopted. Our handbooks serve as the “Help Manual” for Sovos’ statutory compliance software and offer valuable insights into the preparation of those complex regulatory documents.

Though our name may be different, the instructors and the content are still those that you have come to know and respect in the industry. Our team of highly experienced instructors has well over 200 years of combined industry experience. Connect with us to learn more about our current catalog and future partnering opportunities. Find us online at shop.sovos.com. Until then, we look forward to seeing you in class very soon.

Take Action

Ready to learn more about how Sovos Education Services can help your business? Register for education seminars at shop.sovos.com.