Now that the holidays are over, it's time to do a review of your federal withholding. One of the changes included in the new tax bill that went into effect January 1, 2018 was the revised withholding tables. With the new tables, you may end up paying in with your 2018 tax return instead of receiving a refund. These new tables reduced the amount of federal income tax to be withheld from your paycheck if you kept the same number of exemptions. Now would be the right time to adjust your withholding. For example, if you are currently claiming married and 2 exemptions on your W-4, you may want to change it to married and 0 exemptions. This would increase the amount of federal tax withheld to be closer to what it was prior to 2018. It is also recommended to review your federal withholding in June to see if any additional changes need to be made.
For business owners and possibly landlords, now is the time to issue 1099's to people that you paid more than $600 for services or rent. This does not apply to payments made to corporations or to payments made with credit cards. The due date to the IRS, PA and the recipient is January 31, 2019. We recommend that you obtain W-9's from the proper people that did work for you. This will also tell you if they are a corporation or not. If that person refused to provide a W-9, then you are required to withhold 24% in federal tax from their payment.
Attorneys receive a 1099 regardless of payment amount. This does not matter if they are a corporation or not.
The IRS has implemented fines for not filing these forms. The fines are as follows.
-
Not more than 30 days late, the penalty is $50 per return with a maximum penalty of $186,000.
-
31days late up until August 1, the penalty is $100 per return with a maximum penalty of $532,000.
-
After August 1 or not filed at all, the penalty is $260 per return with a maximum penalty of $1,064,000.
-
Intentional disregard, the penalty is $530 per return with no limitation.
The IRS has started to implement this during audits. The IRS agent will ask to see if you have the required W-9's on file. If you do not and a 1099 was not issued, they will implement additional penalties.
PA also requires the same forms to be filed with them. The forms can be filed on E-Tides or can be mailed. For 2019 1099's filed in January 2020 must be sent through E-Tides. PA will not allow you to mail them anymore.
The penalty for not filing a required 1099 with PA is $50 per form.
If you have questions or would like to know more about the changes in the tax laws, contact:
Maurice Brubaker, Enrolled Agent
Brubaker Group, LLC
23 North Derr Drive, Suite 2
Lewisburg Professional Building
Lewisburg, PA 17837
570 524 4134
maurice@brubakeraccounting.com