Posts Tagged ‘1099-K’

Tax Roundup, 11/28/2012: Did you report that 1099-K income? Also: tax deductions and giving levels.

Wednesday, November 28th, 2012 by Joe Kristan

IRS starts data-mining the 1099-Ks.  From Tax Analysts ($link):

     A new IRS compliance program aimed at finding underreporting of gross receipts by taxpayers who receive Form 1099-K information returns from credit card companies or third-party transaction networks launches this week, a senior IRS official confirmed November 27.

     Ruth Perez, deputy commissioner of the IRS Small Business/Self-Employed Division, told Tax Analysts that the first notices under the program will be sent out later in the week of November 26. “Our initial footprint in this area is going to be small while we learn,” she said, adding that the initiative will touch a variety of businesses of different sizes.

If prior matching programs are any guide, many of the notices will be incorrect, giving gray hairs to compliant taxpayers.  Even so, it’s likely to smoke out some eBay entrepreneurs who haven’t bothered to report their income.  If that sounds like you, now is a good time to get into compliance.

 

Learning From a Wrongful Criminal Tax Prosecution.  Tax Analysts has made available to nonsubscribers a great piece by a New York attorney who defended a business owner from a baseless state tax prosecution that was later recanted by the district attorney.  It’s the piece I mentioned earlier this week; kudos to Tax Analysts for making it more widely available.  Sobering reading for practitioners and entrepreneurs.

 

Via the TaxProfThe Millionaires Who Pay the Highest Tax Rate:

 The more your make, the more taxes you pay as a percentage of your income. According to new data from the IRS, people who make $1 million or more had an average tax rate of 20.4% in 2010. Tax filers who earned $30,000 to $50,000 paid an average rate of 4.8%, while those who made between $50,000 and $100,000 paid 7.7%. Those making under $30,000 had a negative effective rate, meaning they paid no federal income taxes after deductions and credits. Put another way, millionaires pay a rate that’s more than four times that of the middle class.

The millionaires pay a higher rate than Warren Buffett’s secretary, I’d wager.

 

Kay Bell,  Would a limit on tax deductions mean less charitable giving?  Of course it would.  The only question is how much.

The guy quoted by Kay doesn’t think it would have a big impact.  I think it would, especially for bigger gifts.   We can’t know for sure, but a paper in the December 11 National Tax Journal estimates that capping the rate benefit of contributions at 12% would reduce individual giving by 5.8% to 14.2%.  A hard deduction cap would reduce the tax benefits of large gifts much more drastically than the 12% credit.

 

Patrick Temple-West,  On ‘fiscal cliff,’ both sides lay groundwork, and more

Wall Street Journal, Dividends Come Early to Avoid Fiscal Cliff:

Faced with a possible tax increase on dividends next year, boards are approving bigger payouts and cutting checks faster to avoid 2013 rates.

On Monday, retailer Dillard’s Inc. and casino operator Las Vegas Sands Corp.  LVS -0.26% said they would pay new, one-time dividends next month. Dillard’s also broke with long practice to pay its regular fourth-quarter dividend in December after paying it in the new year for at least a decade.

Wal-Mart did the same thing last week.  (Via Tax Break)

 

Jack Townsend,  Daugerdas Denied Access to Funds Subject to Forfeiture.  Mr. Daugerdas, whose conviction on tax charges was thrown out based on juror misconduct, says he needs the money to pay for his defense in his retrial.

Jason Dinesen,   Are Donations to a 501(c)(4) Deductible? (No.)

Tax Trials,  Tax Court: Legal Fees Not Deductible for Conduct of S Corp. Sole Shareholder.  This is a great case that I plan to write up in the next few days.

Both?  Education Foundation Or Estate Tax Dodge – Remains To Be Seen (Peter Reilly)

 Jim MauleTithing and Taxing: What is (Gross) Income?

Andrew Mitchel,  Summary of Form 8938 Filing Thresholds

Joseph Henchman,  Connecticut Revenue Commissioner Admits that “Amazon” Tax Has Raised Zero Revenue

In other news, Wednesday ends with “y”:  Another South Carolina Politician Guilty of Tax Charges (Russ Fox)

 

David Brunori, Fetal Craziness:

The recent craziness in Michigan illustrates all that is wrong with tax policy in America. A group of Republican lawmakers have proposed (HB 5684 and HB 5685) a tax credit for unborn fetuses of 12 weeks gestation. What is wrong with such a measure? Everything. First, Adam Smith, who I doubt was pro choice, said that the tax laws should be used to raise revenue. They should not be used to make political statements.  Why do we know this is political statement? Because only a nincompoop would think the tax laws could be administered in such a manner.

I suspect the miscarriage rate would go through the roof, at least as reported on tax returns.

 

A 529 plan would have worked better:  Attorney Disbarred For Submitting Falsified Tax Returns For Financial Aid (TaxGrrrl)

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What are you supposed to do with that 1099-K?

Thursday, February 23rd, 2012 by Joe Kristan

Jason Dinesen has some thoughts.

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1099-K rules become slightly less insane

Friday, February 10th, 2012 by Joe Kristan

The IRS has finally realized what has been obvious to everyone else: it would be insane to require businesses to reconcile their gross receipts to the 1099-Ks issued by credit card companies. Imagine a grocery chain — let alone somebody like Walmart — trying to tie out their gross receipts to their 1099-Ks.
The real use of the 1099-Ks will be to identify people in the eBay/Amazon economy who aren’t reporting their income, though it will probably also help to smoke out, say, restaurant owners or gas station operators who are cooking their books. Even then it will be a crude tool to identify egregious violators — not a way to to tie out income precisely. The idea of tying out gross receipts with 1099-Ks like you tile out an individual’s interest income to their 1099-INTs never made any sense.
More coverage:
Russ Fox
TaxGrrrl

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Credit card reporting still required, but not backup withholding

Monday, October 31st, 2011 by Joe Kristan

The IRS last week issued two releases on the new 1099-K reporting rules for credit card companies. These rules require issuers to report payments on credit cards to the IRS to help them tax the eBay economy.
Notice 2011-89 cuts the payors some slack on reporting the requirements. While payors still have to make “good-faith efforts” to file accurate 1099-Ks, the IRS will not penalize those who try to comply for mistakes this year.
The other notice (Notice 2011-88) postpones the requirement for payors to take “backup withholding” out of payments to card recipients who fail to provide taxpayer identification numbers to the payors.
Kay Bell has more.

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