A recent article on Fox Business News titled “Upcoming Changes to W-2 and 1099 for Small Businesses” by Kate Rogers highlighted a number of useful points regarding W-2 and 1099 compliance for the 2011 tax year. (Read Article)
A quick summary from the article based on a webinar held by Kyle Janssens, brand manager at Greatland:
Changes to W-2s
“No. 1: Social Security tax withholding: The withholding amount is dropping from 6.2% to 4.2% for wage payments, Janssens said.”
“No. 2: Advanced income credit: This credit has been eliminated from the W-2 form and no longer has to be reported. There is also information related to wages and tips that is now obsolete, he said.”
“No. 3: Employee-sponsored health care: There is a new code for the cost of employee-sponsored healthcare, Janssens said, which changes what employers must report on their W-2 form this year.”
Changes to 1099s
“No. 1: The repeal: On April 14, part of the Patient Protection and Affordable Care Act was repealed, so small businesses no longer have to report goods purchased. This was a big area of concern for small business owners, Janssens said.”
“No. 2: Truncating numbers. A pilot program which truncates an individual’s Social Security or tax ID number has been extended, which replaces the first five digits with and X or asterisk, in order to prevent identity theft, Janssens said. This has been extended for the rest of 2011 and 2012 on 1099 and 1098 forms.”
Janssens also had the following recommendations for general preparations of both forms:
- “Do: Use black ink only. “
- “Do: Include decimal points for monetary values”.
- “Don’t: Fold forms or staple them together. “
- “Do: Provide your employees with instructions for both W-2 and 1099 forms.”
- “Don’t: Throw out forms.” (keep for at least 3 years)
The article indicates the changes may be confusing to some. Make sure you get the forms early when they become available and make sure you have obtained the software instructions on prepartion from your software vendor. You may need to capture information differently as well, so allow time for that exercise as well.
Planning will help alleviate the stress associated with the changes. If you need advice or assistance, give me a call.