Deadlines

FinWHAT?

/ Meghan Birmingham Vangeli / Leave a comment

AS OF FEBRUARY 18, 2025 THE INJUNCTION THAT WAS PREVIOUSLY IN PLACE HASE BEEN LIFTED. THE FINCEN WEBSITE HAS POSTED A NEW DEADLINE OF MARCH 21, 2025. PLEASE CONSULT YOUR ADVISOR TO ENSURE YOU COMPLETE THIS REGISTRATION IF YOU ARE REQUIRED.

Who the heck is FinCEN and why do I have to register with them?

Ah, the federal government is at it again…coming up with more hoops for us to jump through. I guess Congress needed to do something to earn their compensation. (C’mon, the holidays, the health insurance, the pension…they should actually have to do some work…) Unfortunately, the “work” they do is actually creating more work for some business owners in the form of FinCEN Beneficial Ownership Information reporting.

What is FinCEN? ”FinCEN” is short for Financial Crimes Enforcement Network (the federal government does love their quirky little acronyms). Their mission, as stated on their website, is as follows:

The mission of the Financial Crimes Enforcement Network is to safeguard the financial system from illicit use, combat money laundering and its related crimes including terrorism, and promote national security through the strategic use of financial authorities and the collection, analysis, and dissemination of financial intelligence.

That is a long sentence with a lot of commas. What does it boil down to? They are a federal agency created to prevent money laundering and identify funding of illegal activities like terrorism. In theory, this sounds like a good thing. However, they have cast a wide net in the pursuit of this mission; a lot of plankton will be tangled up in order to catch the whale.

OK, what did they do? FinCEN implemented a program called “Beneficial Ownership Information” or “BOI”. Under this program, most entities formed through the filing of documents with the secretary of state of a US state or territory (or a foreign jurisdiction) now have a legal obligation to file a Beneficial Ownership Information Report with FinCEN. This applies to you if you are…

  • a corporation (Subchapter S or C)
  • a partnership (limited partnerships or other registered partnerships)
  • an LLC (even single-member LLCs)

Well, am I going to have to file? The short answer to that is ‘probably yes’ if you are organized as one of those entities. There a a number of exemptions, but they are pretty specific so most entities are unlikely to qualify for one. FinCEN BOI reporting does not apply if you are an sole proprietor (even with a registered DBA or an EIN) or an unregistered general partnership/joint venture. But if you are a teeny, tiny single-member LLC, you will likely be required to file a BOI report. Additionally, if you reside in a community property state (like Texas), both spouses will need to register even if only one spouse is the named owner.1 (Like I said, a lot of plankton will be tangled up in this.)

What happens if I don’t file? How good do you look in orange? If you fail to file, you risk fines of up to $10,000 and imprisonment up to 2 years. It is not in your best interest to ignore this.

Ok, ok, orange is not my color. When do I have to file this? Soon…

  • If your entity was already in existence and registered with a secretary of state on January 1, 2024, you have until January 1, 2025 to file your initial report. 
  • If your entity was set up on or after January 1, 2024, and before January 1, 2025, you have 90 calendar days to complete and file this BOI report. 
  • On or after January 1, 2025, new entities will have 30 calendar days to comply.

Then, if ANYTHING changes (i.e., you move, the business address changes, there is a name change, there is a change in the ownership of the company, there is a change/expiration to the document you used to register) you must file a corrected report within 30 calendar days or risk the abovementioned penalties for noncompliance. (Is orange still the new black?)

Wow, this is crazy. But I’m sure you’ll stay on top of this for me, right o beloved CPA? Nope. Even though I look fabulous in orange, I prefer a muted coral over…um…federal penitentiary orange. At this time, I am not offering this service. However, I point you in the direction of the FinCEN BOI reporting website right here and an instruction guide here. I am happy to answer questions to the best of my ability, and will send out the occasional reminder as we get closer to the end of the year, but I will not prepare or file these reports on your behalf. If you would like to engage a professional to complete this for you, I suggest you consult your attorney.

I provide this for information and entertainment purposes. It is not meant to be advice for your specific situation. Please consult your attorney or other advisor for assistance with your FinCEN compliance needs.

  1. This is applicable if the entity interest is community property. If, for example, it was acquired through gift or bequest, was owned by one spouse prior to the marriage, or was partitioned as separate property as part of a premarital agreement, it may be considered separate property. Generally, in community property states, the default assumption is that all property is part of the community. So please consult your legal advisor if you think your ownership interest might be considered separate property. Additionally, if you have already registered and did not register your spouse as community property owner, consult your advisor. You may need to update your registration as soon as possible. ↩︎

To 1099 or not to 1099?

/ Meghan Birmingham Vangeli / Leave a comment

If you are an independent contractor (aka “a freelancer”), chances are good that you have been the recipient of a Form 1099-NEC (or several) somewhere along the way. However, did you know that you may be required to file them too? Read on…

Why, you ask, would I need to file such a form?  Well, if you paid any person(s) $600 or more to provide services in the course of your business1 during 2023, you are required to prepare and file Form(s) 1099-NEC2 for them by January 31, 2024.

What do you mean “person”?  Well, a “person” in this circumstance is an individual, sole proprietor, partnership, or LLC that is NOT organized as a corporation.  So, if you paid Frank the Painter, Inc. (an S-Corporation) $700 to paint your rental house, you are off the hook and do not have to send a 1099 to his corporation.  But if you hired Gina Smith, an unincorporated sole proprietor, to repair your rental house plumbing for $600 or engaged Dewey, Cheatham & Howe, LP for $1,000 of legal consulting3 for your self-employed business, you will need to send Gina and/or DC&H a Form 1099-NEC.

What if I paid a guy I found on Craigslist $750 to buy a water heater for my rental?  Do I need to send that guy a 1099-NEC too?  Nope, 1099-NECs are only for service or labor payments, not purchases of goods or equipment. However, if you are issuing a Form 1099 to a contractor who supplied or installed materials and equipment incidental to the services they were providing, then you would include the entire amount of the payment on the Form 1099.

Okay, well what do I need to do to prepare these 1099-NECs?  The first thing is you need to get a Form W-9 from anybody you paid $600 or more during 2023.  (Really, it is better to get the W-9 from anyone your business hires before any work commences or money changes hands…but better late than never.)  This will give you the person’s legal name, current address, taxpayer identification number/social security number, and a confirmation of their federal tax classification (i.e., individual, partnership, corporation, etc.).  Then, if you plan to prepare and file the Forms 1099-NEC yourself, I would take a peek at the IRS Form 1099-NEC filing instructions for some guidance. You can either purchase the special paper 1099 and 1096 forms (no, you can’t download them from the IRS website), fill them out, and mail them in (only permitted if you have 10 or fewer forms to file), or you can use an online service to file them electronically (now required if you have more than 10 Forms 1099-NEC to file).4  Or you can always hire an accountant to help you… <ahem>

So what terrible thing is going to happen if I don’t file Forms 1099-NEC? To be blunt, you will pay penalties and wind up filing them anyway. The IRS hates this, and they have started hating it even more in recent years. If you are supposed to file Forms 1099 and you fail to do so, the IRS deems those Forms 1099 to be late. They then charge late penalties of anything from $60 to $630 per form depending on how late it is. That’s per Form 1099. So if you have 10 Forms 1099-NEC to file, you could be on the hook for up to $6,300 in penalties…and you’ll still have to file the forms. The penalties are severe, so it is really best to get these forms filed timely (that is, by January 31st).

Take a look at your tax records to determine if your business paid anybody $600 or more during 2023. If you did, gather the info and get those Forms 1099-NEC done as soon as possible!

  1. “Business” could mean a trade or business activity (like freelance musician or tax preparer) or a rental activity (like a landlord or an AirBnB host). ↩︎
  2. Yes, Form 1099-NEC. Not Form 1099-MISC. Go back and read my prior post on this. We haven’t been using Form 1099-MISC for “Nonemployee Compensation” since tax year 2019. If you’ve been using Form 1099-MISC for the past three years, well, you’re doing it wrong. ↩︎
  3. There are some special rules for legal fees. Consult your tax advisor if you may have this issue. ↩︎
  4. The IRS has recently unveiled its new online efiling service for information returns like Forms 1099. It’s called the “Information Returns Intake System” or IRIS. So cute…so floral…so, evidently, dysfunctional. Surprisingly (or not), every practitioner I have heard from has had problems with the system locking them out. So, for this year, I would investigate a different filing method (either paper, if eligible, or a commercial efiling service) for your Form 1099 filing needs. ↩︎

I provide this for information or entertainment purposes. It should not be construed as tax advice. Please consult your tax advisor to address your specific tax filing needs.

The IRS Extended the Deadline

/ Meghan Birmingham Vangeli / Leave a comment

You have probably heard by now that the IRS has extended the deadline to both file and pay your 2019 taxes until July 15, 2020.  Read all about the Service’s COVID-19 relief plans here.

So, what does this mean?

This means that the calendar for payments and other deadline-related items has shifted a bit.  The obvious change is the extra time to both file your 2019 tax return (Form 1040 et al) and pay the balance due without penalty on July 15th, 2020 (but see “The Fine Print” below).  However, this affects a few other things I see in my practice:

1.  Estimated tax payments for 2020

The timeline for making estimated tax payments (Form 1040-ES) for 2020 tax has shifted a bit…and it’s a little wonky.  Here it is…

  • 1st quarter 2020 is now due on July 15th, 2020
  • 2nd quarter 2020 is still due on June 15th, 2020 (unchanged – please note that this is BEFORE 1st quarter is due)
  • 3rd quarter 2020 is still due on September 15th, 2020 (unchanged)
  • 4th quarter 2020 is still due on January 15, 2021 (unchanged)

So, if you pay quarterly, don’t miss that first payment for 2nd quarter, due June 15th, which is due before the payment for 1st quarter, due July 15th.  Not confusing.  Not at all.

2.  IRA (Traditional or Roth) and HSA contributions for 2019 tax year

The deadline for these contributions has also been extended until July 15th, 2020.

3.  SEP employer-portion contributions for 2019 tax year

The deadline for these contributions has also been extended until July 15th, 2020.  However, this contribution deadline can be extended further until October 15th, 2020, by filing a valid extension for your tax return.

4.  Tax return extension

You can request an additional 3 months time (until October 15th, 2020) to prepare and submit your completed 2019 tax return.  The deadline to file this extension is now July 15th, 2020.  However, if you anticipate a balance due, it must be paid no later than July 15th to avoid a possible penalty and interest.

So, what do I do?

Well, now would be an excellent time to gather your tax data and submit it to your tax preparer (or prepare your own return, if you’re into that).  If you file quarterly estimated payments, you should try to get your return completed before the June 15th 2nd quarter payment due date.  And, finally, refunds will still be issued within a few weeks of filing your return, so there’s no change there.

You could also send a little thank you note to the IRS Commissioner, Charles P. Rettig.  I’m sure he would love to hear from you.

The Fine Print:  The IRS has postponed the deadline for the “failure to pay” penalty.  If you did not satisfy the requirements of the “safe-harbor” for estimated tax during 2019, it is possible that you may owe an “underpayment” penalty for 2019 tax.  Consult your tax advisor.

Second Quarter 2019 Estimated Tax Payments Due June 17th!

/ Meghan Birmingham Vangeli / Leave a comment

Greetings gentle taxpayers!

If you are not subject to (enough) withholding due to significant self-employment or investment income, you must make quarterly estimated tax payments.  The next one is due Monday, June 17th, 2019.  This payment is must cover estimated tax for the second quarter of 2019 (April-June).  However, if you underpaid (or skipped) the first quarter payment, you need to make up any shortfall from first quarter along with your second quarter payment.  In other words, this second quarter payment plus whatever you paid for first quarter (at April 15th) must equal 50% of your total estimated tax for the year.

Click here to go to the Form 1040-ES forms and instructions.  On pages 3 and 4 you will find a list of the available payment methods.  (Fun fact: the IRS cannot accept a check, personal or cashier’s, for $100 million or more.)  Page 5 has the mailing address information if you pay by sending a check and 1040-ES voucher.  Finally, the second quarter 2019 1040-ES voucher is on page 11.

If you choose to file by mailing in your voucher and a check, be sure you mail it on or before June 17th.  I strongly recommend using certified mail to document the postmark date.

And, oh yeah, have a great summer!

Let’s Talk 1099s

/ Meghan Birmingham Vangeli / Leave a comment

If you use independent contractors (service providers who are not your employees) in your business, you may be required to file Forms 1099-MISC and the related Form 1096.  This is a form that you don’t want to miss because the IRS penalties for late filing or failure to file are a serious bummer.

Here is a link to the Form 1099 instructions, but these are the general rules for most small business owners and sole proprietors:

  • The Form 1099-MISC/Form 1096 filing deadline is January 31, 2018.  This is both to distribute forms to nonemployee compensation recipients AND to file with the IRS.
  • Prepare a Form 1099-MISC for any nonemployee compensation recipient paid $600 or more during 2017.
  • Nonemployee compensation paid to independent contractors is reported in Box 7 of Form 1099-MISC.
  • Form 1099-MISCs generally are not required to be issued to service providers that are organized as corporations (both Subchapter C and S).*
  • For Form 1099-MISC filing using paper forms, the original forms suitable for filing with the IRS must be purchased.**  They can be ordered online or purchased at an office supply store.  (Pro tip: spring for the 1099 envelopes too.  Makes life easier and looks a lot more professional than plain envelopes.)
  • If you pay independent contractors, be sure to have them fill out a Form W-9 so you have their tax identification number and updated address information.  Keep this Form W-9 in your files so it is available should the IRS ever want to see it.
  • If you are a sole proprietor, I strongly recommend that you obtain an employer identification number.  You can apply for one online here.  This keeps your social security number from being distributed with every Form 1099-MISC.

It’s not too early to start thinking about this.  January is right around the corner!

 

*Attorney fees over $600 must be reported on Form 1099-MISC even if the legal provider is organized as a C or S Corporation.  Use Box 7.

**Unfortunately, the sample Forms 1099-MISC/Form 1096 on the IRS.gov website are not suitable for filing, and can trigger a penalty if submitted to the IRS.

 

Time to get ready for 2016 Tax Returns!

/ Meghan Birmingham Vangeli / Leave a comment

Greetings and welcome to the tax filing season for your 2016 tax returns!  Deadlines to note:

-January 31st 2017: Filing deadline for 2016 Forms 1099 and Form 1096 if 1099 recipients have box 7 income (Nonemployee Compensation) https://www.irs.gov/pub/irs-pdf/i1099gi.pdf

-March 15 2017: Initial filing deadline for 2016 Forms 1065 and 1120S

-April 18 2017: Initial filing deadline for 2016 Forms 1040, 1041, 1120, and 2017 1st quarter Form 1040-ES estimated payments.

-May 15 2017: Initial filing deadline for 2017 Texas Franchise Tax Returns