Tax Talk Today(R) October Webcast Provides Insight Into Year-End Employment Tax Preparation

October 20, 2006; 02:02 AM

On the October 17 Webcast of Tax Talk Today, a panel of IRS officials and tax experts discussed the new Form 944 and provided reminders and tips for tax practitioners dealing with Form 1099 as well as employment taxes in general.

Form 944, Employer's Annual Federal Return, launched in 2006 with the first annual returns due January 31, 2007 and primarily impacts small businesses. Designed for businesses with a total employment tax liability of $1,000 or less, Form 944 replaces the quarterly Form 941 with a single, annual filing and payment of federal employment tax for those taxpayers notified by the Service. "The burden reduction for the 944 is that it is filed annually," said Martha Danielson, program analyst, Wage and Investment's Business E-file Section, IRS. "Another benefit is that you would only have to pay once a year," provided you owe less than $2,500 with your return.

The first Forms 944 are due by January 31, 2007. Existing businesses that qualify for Form 944 should have already received a notification letter from the IRS in February 2006; new businesses that qualify for Form 944 will be identified as a part of their Employer Identification (EIN) application process. The IRS cautioned tax practitioners to remember that the $1,000 employment tax threshold for Form 944 is a separate issue from the federal tax deposit threshold of $2,500.

"There are two different amounts for two different purposes," said Kathy Welsh, project manager, Office of Taxpayer Burden Reduction, IRS.

Another important year-end form for employment tax is the Form 1099. Complex rules governing corrections to this information reporting form can present a significant challenge. According to Gilford Queen, tax law specialist, Forms and Publications, IRS, tax practitioners should pay careful attention to the step chart in the general instructions for Form 1099, because the type of mistake will dictate the steps required for correction. Additional assistance with Form 1099 problems can be found on the IRS Web site at www.irs.gov/.

"It can get fairly complicated," cautioned Queen.

The Tax Talk Today panel agreed that tax practitioners need to keep clients well-informed with regard to the use -- and misuse -- of Form 1099.

"The only thing I think we can do is make sure that our clients are aware that, if you do this wrong, it can be very expensive," said Roger Harris, EA, president and COO, Padgett Business Services.

For all year-end employment tax issues, the IRS reminded the practitioner community that filing compliance and reporting compliance -- including fringe benefits -- are key areas of concern that are monitored year-round. Ongoing education and information efforts from the IRS can help to alleviate some common compliance problems.

"We can help them try to get things done properly up front, so that they won't run afoul of a compliance action later on," said Joseph Tiberio, senior policy analyst, Employment Tax Compliance Policy, Small Business/Self-Employed Division, IRS.

"I would recommend that the practitioner go to IRS Publication 15-B," said Nora Daly, CPP, senior legislative analyst, Oracle Corporation. "That's a really good discussion of what should and should not be included in an employee's income."

A full transcript of this month's Webcast -- titled "Employment Taxes: Getting Ready for Year End" -- can be accessed at: www.taxtalktoday.tv/index.cfm?page=5.71.

Tax Talk Today is brought to you by the IRS. The next Webcast, "Electronic IRS," will be Tuesday, November 14, from 2 - 3 p.m. ET.

About Tax Talk Today
Brought to you by the IRS and produced by L&M Production Design Group, based in Alexandria, VA, Tax Talk Today is a free, live, monthly interactive Webcast aimed at educating tax professionals on the most contemporary and complex tax issues. The award-winning series airs monthly at www.taxtalktoday.tv and programs are archived on the site for one year. The live Webcast enables viewers to ask questions via e-mail to the panelists and receive on-air answers.