Tips to Navigate 2012 W-2 and 1099 Changes
Every year brings with it new changes related to W-2 and 1099 forms and reporting requirements. Due to the government's increasing focus on the proverbial tax gap, it's more important than ever for small businesses to understand the changing W-2 and 1099 reporting environment.
Here are some of the key changes that will affect small business this year.
W-2 Form Changes and New Additions
The reduced rate of 4.2 percent for social security tax withholding (for employees only) is extended for wage payments made in 2012. Also new in tax year 2012, compensation of $600 or more that is paid to H-2A visa agricultural workers must be reported on Form W-2 if the worker furnishes a valid taxpayer identification number. If the worker does not furnish a valid taxpayer identification number, report the payments on Form 1099-MISC.
In addition to the above W-2 form changes, there are several specific form updates to various 1098 and 1099 forms. Below are several of the more prominent changes for 2012:
- Filers of Forms 1098 (except 1098-C), 1099, and 5498 may truncate a recipient's social security number, individual taxpayer identification number, or adoption taxpayer identification number on paper payee statements for tax year 2012.
- Form 1098: Mortgage insurance premiums paid or accrued after December 31, 2011, are no longer eligible to be treated as interest paid by the payer/borrower.
- Form 1099-B: New boxes have been added to Form 1099-B for reporting the stock or other symbol, quantity sold, whether basis is being reported to the IRS, and state income tax withheld. Other boxes on the form have been moved or renumbered. Brokers must also report on Form 1099-B sales of covered securities by an S corporation if the S corporation acquired the covered securities after 2011.
- Form 1099-C: Box 6 is now titled Identifiable Event Code and requires the entry of a code for the identifiable event. For 2012, all codes are optional except for Code A – Bankruptcy.
- Form 1099-DIV: Exempt-interest dividends from a mutual fund or other regulated investment company are now reported on Form 1099-DIV. Those amounts will no longer be reported on Form 1099-INT. Boxes 12 through 14 have also been added to Form 1099-DIV to report state income tax withheld.
- Form 1099-INT: Exempt-interest dividends from a mutual fund or other regulated investment company (RIC) are no longer reported on Form 1099-INT. Those amounts will now be reported on Form 1099-DIV. Boxes 11 through 13 have also been added to Form 1099-INT to report state income tax withheld.
- Form 1099-MISC: Compensation of $600 or more paid in a calendar year to an H-2A visa agricultural worker and any backup withholding must be reported on Form 1099-MISC if the worker fails to provide the employer with a taxpayer identification number. If the worker does furnish a valid taxpayer identification number, report the payments on Form W-2.
Below are some important dates for filers to remember as they enter tax season:
- January 31, 2013 – Due date to send most 1099s and Copies B, 2, and C of form W-2 to each recipient/employee
- February 28, 2013 – Due date to send Copy A of form W-2 to the Social Security Administration (SSA) and form1099 to the Internal Revenue Service (IRS) on paper
- April 1, 2013 – Due date to send copy A of form W-2 to SSA and form 1099 to IRS electronically (e-file)