Year in (1099 and W-2) review

With W-2 and 1099 reporting season in full swing (along with our nation's love of year-end lists) Greatland Corporation has released its inaugural selection of some of the year’s most news-making events as they pertain to 1099 and W-2 forms.

BP Gulf Oil spill
 
One of the heartbreaking consequences of this summer’s never-ending oil spill was the loss of income for the many residents who make their livelihood in the fishing industry. Louisiana’s fishing industry, alone, generates approximately $2.4 billion annually and produces one-third of the domestic seafood consumed in the United States.
 
The Internal Revenue Service requires all “fishing boat proceeds” to be reported on form 1099-MISC, which will undoubtedly be down as a result of this year’s spill.
 
Oprah’s final season, her "favorite things" times two
 
2010 marked the kick-off of Oprah’s 25th and final season. To celebrate this swan song, the famous talk show host held her popular Favorite Things giveaway show twice, and gave away extravagant items like cruises and cars to hundreds of audience members.
 
One thing we did not see her give away, but each member of the audience will most definitely receive? A 1099-MISC. The IRS requires all contest winners and giveaway recipients to report total fair market value of items received greater than $600, which was certainly the case with Oprah’s generous gifts.
 
Mid-term elections
 
A new wave of change swept Washington in November as the mid-term elections gave Republicans the majority in the House and gains in the Senate. Many long-time members saw their time in Washington end, leading them to find new means of employment. As history has shown us, many former politicians will become consultants and pundits, contracting their services out and thus receiving a 1099-MISC form to report their income.
 
And as we also learned in 2010 from censured politician Charles Rangel, reporting all income is a good thing. Charges against Rangel included failing to pay income tax on a rental property he owned (1099-MISC) and failing to report all his income (1099-INT or 1099-DIV). Ironically, he was the chair of the House Ways and Means Committee – the same committee that writes the federal tax code.
 
Sweeping health care legislation; 1099 provision
 
2010 was all about health care reform. A new provision in the health care reform legislation is aimed at improving reporting and generating more tax income. It will require all businesses to not only issue a 1099 to document wages paid to contract workers, but also issue a 1099 form to any business from which they purchase at least $600 in goods or services. 
 
Using the above example, if Oprah’s company, Harpo, buys flowers for the show’s green room 20 times during the year at a cost of $30 each time, her company also will have to issue a 1099 form to the local florist. Although Oprah could probably handle the additional requirement, estimates have the average business seeing its 1099 reporting increase up to tenfold – a burden much greater for the nation’s small businesses.
 
Stagnant unemployment; growth in temporary workers
 
2010 was the year of lingering unemployment. That said, it also was the rise of the contract or freelance worker. This means fewer W-2 forms and more 1099-MISC forms from employers. The IRS projects a 16.5 percent decrease in W-2 filings and a 2.7 percent increase in 1099-MISC filings (for freelance/contract workers) for tax year 2010.
 
2010 crime down
 
For the first half of 2010, the FBI reported crime – including petty theft and larceny – was down across the board. Motor vehicle theft dropped 9.7 percent, larceny fell 2.3 percent, and burglary decreased 1.4 percent.
 
Perhaps we owe these decreases to the fact that the IRS requires all thieves to report the fair market value for the items they stole on their tax returns. Maybe thievery is just becoming too much of a tax headache. No word if purchases made by burglars on crowbars and ski masks need to be reported in the aforementioned new 1099-MISC requirement.
 
Speaking of criminals
 
Although 2010 was the year that Lindsay Lohan, Wesley Snipes, and rappers TI and Lil Wayne went to jail, a 2010 report by the Treasury Inspector General stated that the real problem for the IRS was that fraudulent tax returns increased by 50 percent, with an estimated 50,000 of those returns (accounting for $130 million in income) filed by inmates without any wage or income information (supporting W-2 or 1099 forms).
 
The IRS was able to catch almost 4,500 forms that were filed by inmates where they falsely claimed the Earned Income Tax Credit. Without congressional action to require state and federal prisons to report the status of inmates to the IRS, there will be gaps in the prison data and compliance problems will persist.
 
About Greatland:
Grand Rapids, MI-based Greatland Corporation is a provider of W-2 and 1099 forms and related e-filing products for business. Greatland has a 1099 and W-2 fact center located on its Web site with answers to many of the top filing questions.
 

Related articles:

You may like these other stories...

By Cathy Stopyra and Todd SimmensUnderpayment interest, refund interest, and penalties charged to businesses are just a few of the considerations the IRS calculates when determining taxation for a given company. Though...
FASB mulling a revamped income statementDavid M. Katz of CFO wrote on Tuesday that the Financial Accounting Standards Board (FASB) is in the early stages of researching whether to launch a project aimed at improving and...
Renaissance avoided more than $6 billion tax, report saysThe Senate Permanent Subcommittee on Investigations said on Monday that a Renaissance Technologies LLC hedge fund’s investors probably avoided more than $6...

Upcoming CPE Webinars

Jul 31
In this session Excel expert David Ringstrom helps beginners get up to speed in Microsoft Excel. However, even experienced Excel users will learn some new tricks, particularly when David discusses under-utilized aspects of Excel.
Aug 5
This webcast will focus on accounting and disclosure policies for various types of consolidations and business combinations.