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Summer hours are in effect: Our offices close at NOON on Fridays from May 17th to July 12th
Our offices are closed tomorrow 1/7/25 from 8am – 1pm for a firm event. Thank you.
One of the main reasons cited by dentists and dental students for pursuing a career in dentistry is the potential to be their own boss. For many, that starts with the purchase of a dental practice.
Yet, many new dentists get so focused on clinical care that they ignore the business complexities of running a practice. To ensure that you are purchasing a practice that makes financial sense, consider these key areas of due diligence:
Market area — Who will be your competition within 1 mile, 5 miles and 10 miles of the practice? Just as important, are the demographics of the area appropriate for the type of dentistry you wish to practice? For example, if you are interested in emphasizing aesthetic and complex restorative dentistry, you’ll want to practice in a community where the demographics will support it.
Patient characteristics — Are most of the patients returning patients or are there a lot of “one-offs” on the books? How about the ratio of patients with dental insurance to fee-for-service patients?
Growth potential — Assume you analyzed several years of a potential practice’s production reports and saw that the majority of perio and endo services have been referred out. Depending on your personal skill set and comfort level, offering these services in-house might create excellent growth opportunities.
Equipment — If not already in place, it could cost tens of thousands of dollars to upgrade a low-tech practice with technology such as digital radiography, a high-end intraoral camera system and a robust Electronic Dental Records System. On the other hand, if the technology is already in place, how much will it cost to maintain the equipment annually?
Current financials — Have you been able to obtain at least three years of prior tax returns and financial statements? Is the revenue and net profit trending upward or do you see a drop off? Be wary if the seller has not been completely transparent and answered all of your questions in a satisfactory manner.
Financing — In addition to borrowing for the purchase price, you might need to borrow additional funds to support cash flow needs as collections ramp up (it may take time to get revenue flowing, but expenses start immediately).
Cash flow —Your lender will want to see a forecast of cash flow for at least five years. If you can, break the numbers out on a monthly basis for at least the first two years, and then on an annual basis for years 3 – 5. Of course, one of the benefits of purchasing an established practice is that you are purchasing an established income stream.
Structure of the purchase agreement — What exactly are you buying? With an asset sale, you are purchasing the agreed-upon assets of the practice. With a business sale, you are purchasing the owner’s equity in the practice and are, essentially, stepping into the ownership shoes of the seller — liabilities and all.
Allocation of purchase price — Will you and the seller be able to reach an agreement on how to allocate the purchase price between goodwill and assets eligible for accelerated depreciation? This will require some negotiating between both parties.
Acquiring a dental practice is a major step — one that requires some guidance. Our firm can help you with the financial aspects and planning you need to start out on solid footing. We have the experience to help set up new business ventures as well as structuring the purchase of an existing business.
As we approach year-end, one of the earliest business tax reporting tasks that must be completed is preparation of information returns known as Forms 1099. The purpose of Forms 1099 is for businesses to report to the IRS various items of income and deduction for a recipient. The IRS will match the information received on these forms to recipients’ tax returns, and if there is a discrepancy, the IRS will contact the taxpayer regarding the discrepancy.
Form 1099-MISC is the most common 1099 prepared by businesses. This Form reports payments made in the course of a trade or business to individuals and unincorporated businesses that do not constitute wages. The most common types of payments reported are royalty payments or payments to independent contractors for services or work. Below is a list of payments made by businesses that must be reported to recipients on Form 1099-MISC:
NOTE: The exemption from issuing Form 1099-MISC to a corporation does not apply to payments for legal services provided by corporations or for payments for medical or health care services provided by corporations.
Link to example Form 1099-MISC: www.irs.gov/pub/irs-pdf/f1099msc.pdf
Link to IRS instructions for preparation of Form 1099-MISC: www.irs.gov/pub/irs-pdf/i1099msc.pdf
Preparation of the actual Forms 1099-MISC is not difficult. But the determination of which vendors, service providers or other payees must receive a 1099-MISC, as well as gathering and summarizing all of the information that must be reported,can be time consuming.
In order to prepare Forms 1099-MISC, businesses must gather or summarize the following information for each 1099 recipient each year:
We recommend that businesses obtain the first two items of information each year on Form W-9 (http://www.irs.gov/pub/irs-pdf/fw9.pdf) for each recipient before the first payment of the year is issued to the recipient. The payment information can be automatically summarized in accounting software programs or can be summarized from detailed reports by payee.
Generally a copy of Form 1099-MISC must be furnished to a recipient by January 31st of the year following the reporting year. Accordingly, for 2015 reporting, Forms 1099-MISC should be mailed to recipients by February 1, 2016 because the due date falls on a Sunday. If, however, amounts are reported to 1099-MISC recipients in box 8 (Substitute payments in lieu of dividends or interest) or box 14 (Gross proceeds paid to an attorney), copies must be mailed to recipients by February 16, 2016.
Businesses that submit less than 250 of any one type of information returns can file paper Forms 1099. If a business files paper forms, specially prescribed forms must be used so that the paper forms submitted can be read by IRS optical character recognition (OCR) equipment. Most office supply stores sell the specially prescribed Forms 1099. (Do not attempt to download and print Form 1099 from the IRS website!) Failure to use the specially prescribed forms could subject the filer to a penalty of up to $100 per form.
Forms 1099 submitted on paper must be mailed to the IRS on or before February 29th of the year following the reporting year. Forms 1099 filers should submit copy A of Forms 1099 along with Form 1096 (Annual Summary and Transmittal of U.S. Information Returns) to the IRS at the address listed on Form 1096, based on the principal business location of the filer. Form 1096 is also a specially prescribed form and can also be purchased at office supply stores.
Businesses that must submit more than 250 of any type of information returns must file electronically using a system called FIRE (Filing Information Returns Electronically). The FIRE system is accessed via the Internet at https://fire.irs.gov/firev1r/default.aspx. Users must have software that can produce a file in the proper format according to IRS Publication 1220. Businesses required to submit Forms 1099 electronically generally must obtain IRS approval to do so by submitting Form 4419 – Application of Filing Information Returns Electronically at least 45 days before the due date of the returns. The due date for filing 2015 electronic Forms 1099 is March 31, 2016.
The Internal Revenue Code includes penalties that may apply to businesses required to file Forms 1099. The penalties are applied, unless due to reasonable cause, for:
Generally, the penalties imposed are from $30 per return to $250 per return, depending on the type of failure and how soon the errors are corrected. There is a de minimis exception for returns that failed to include required information or include incorrect information if there was timely filing of information returns and if all errors are corrected by August 1st of the year following the reporting year.
Stockman Kast Ryan + CO is here to help you with this year-end task. We can prepare Forms 1099-MISC for you or we can train you and/or your staff to not only prepare the 2015 Forms 1099-MISC but also assist with a jump start on the 2016 1099-MISC preparation process. We can assist with 1099 QuickBooks mapping and with implementation of procedures to gather and summarize all of the information required to file accurate 1099s as tax year 2016 progresses.
As the end of the year approaches, it is clear that tax planning will be no less complicated than in recent years. Several tax breaks that had expired were extended through the end of 2014, but there is no crystal ball for what Congress will do this year. Fortunately, although there are some year-end tax planning strategies that can’t be implemented until after tax legislation is signed into law, there are still many that can be implemented now.
Year-end tax planning for businesses often focuses on acquiring equipment, machinery, vehicles or other qualifying assets to take advantage of enhanced depreciation tax breaks. Unfortunately, the following breaks were among those that expired on December 31, 2014:
Enhanced Section 179 expensing election. Before 2015, Sec. 179 permitted businesses to immediately deduct, rather than depreciate, up to $500,000 in qualified new or used assets. The deduction was phased out, on a dollar-for-dollar basis, to the extent qualified asset purchases for the year exceeded $2 million. Because Congress failed to extend the enhanced election beyond 2014, these limits have dropped to only $25,000 and $200,000, respectively.
50% bonus depreciation. Also expiring at the end of 2014, this provision allowed businesses to claim an additional first-year depreciation deduction equal to 50% of qualified asset costs. Bonus depreciation generally was available for new (not used) tangible assets with a recovery period of 20 years or less, as well as for off-the-shelf software. Currently, it’s unavailable for 2015 (with limited exceptions).
Lawmakers may restore enhanced expensing and bonus depreciation retroactively to the beginning of 2015, but they probably won’t take any action until late in the year. In the meantime, how should you handle qualified asset purchases?
Keep in mind that, to take advantage of depreciation tax breaks on your 2015 tax return, you’ll need to place assets in service by the end of the year. Paying for them this year isn’t enough.
Other expired tax provisions to keep an eye on include the research credit, the Work Opportunity credit, Empowerment Zone incentives and a variety of energy-related tax breaks.
As always, consider traditional year-end planning strategies, such as deferring income to 2016 and accelerating deductible expenses into 2015. If your business uses the cash method of accounting, you may be able to defer income by delaying invoices until late in the year or accelerate deductions by paying certain expenses in advance.
If your business uses the accrual method of accounting, you may be able to defer the tax on certain advance payments you receive this year. You may also be able to deduct year-end bonuses accrued in 2015 even if they aren’t paid until 2016 (provided they’re paid within 2½ months after the end of the tax year).
But deferring income and accelerating deductions isn’t the best strategy in all circumstances. If you expect your business’s marginal tax rate to be higher next year, you may be better off accelerating income into 2015 and deferring deductions to 2016. This strategy will increase your 2015 tax bill, but it can reduce your overall tax liability for the two-year period.
Finally, consider switching your tax accounting method from accrual to cash or vice versa if your business is eligible and doing so will lower your tax bill.
Something else to think about on the tax front as we approach year end is the upcoming deadline for the Affordable Care Act’s information reporting provisions for applicable large employers (ALEs). ALEs — generally those with at least 50 full-time employees or the equivalent — must report to the IRS information about what health care coverage, if any, they offered to full-time employees.
The reporting deadline is February 28 (March 31, if filed electronically) of the year following the calendar year to which the reporting relates. Smaller employers that are self-insured or part of a “controlled group” ALE will also have reporting obligations.
With the deadline approaching, now is the time for affected employers to begin assembling the necessary information. The compliance obligation will likely require a joint effort by the payroll, HR and benefits departments to collect the relevant data.
The IRS has developed new forms for this type of information reporting: Form 1094-C, “Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns,” and Form 1095-C, “Employer-Provided Health Insurance Offer and Coverage.” (A non-ALE self-insured employer should file Forms 1094-B and 1095-B.)
Uncertainty over expired tax breaks has been an issue with year-end tax planning for the past few years. Nevertheless, most steps to reduce your 2015 tax bill must be taken before year end. We can guide you through the uncertainty by helping you to implement the strategies available today and to be in a position to act quickly when tax legislation is signed into law.
As the end of the year approaches, it is clear that tax planning will be no less complicated than in recent years. Several tax breaks that had expired were extended through the end of 2014, but there is no crystal ball for what Congress will do this year. Fortunately, although there are some year-end tax planning strategies that can’t be implemented until after tax legislation is signed into law, there are still many that can be implemented now.
Year-end tax planning for businesses often focuses on acquiring equipment, machinery, vehicles or other qualifying assets to take advantage of enhanced depreciation tax breaks. Unfortunately, the following breaks were among those that expired on December 31, 2014:
Enhanced Section 179 expensing election. Before 2015, Sec. 179 permitted businesses to immediately deduct, rather than depreciate, up to $500,000 in qualified new or used assets. The deduction was phased out, on a dollar-for-dollar basis, to the extent qualified asset purchases for the year exceeded $2 million. Because Congress failed to extend the enhanced election beyond 2014, these limits have dropped to only $25,000 and $200,000, respectively.
50% bonus depreciation. Also expiring at the end of 2014, this provision allowed businesses to claim an additional first-year depreciation deduction equal to 50% of qualified asset costs. Bonus depreciation generally was available for new (not used) tangible assets with a recovery period of 20 years or less, as well as for off-the-shelf software. Currently, it’s unavailable for 2015 (with limited exceptions).
Lawmakers may restore enhanced expensing and bonus depreciation retroactively to the beginning of 2015, but they probably won’t take any action until late in the year. In the meantime, how should you handle qualified asset purchases?
Keep in mind that, to take advantage of depreciation tax breaks on your 2015 tax return, you’ll need to place assets in service by the end of the year. Paying for them this year isn’t enough.
Other expired tax provisions to keep an eye on include the research credit, the Work Opportunity credit, Empowerment Zone incentives and a variety of energy-related tax breaks.
As always, consider traditional year-end planning strategies, such as deferring income to 2016 and accelerating deductible expenses into 2015. If your business uses the cash method of accounting, you may be able to defer income by delaying invoices until late in the year or accelerate deductions by paying certain expenses in advance.
If your business uses the accrual method of accounting, you may be able to defer the tax on certain advance payments you receive this year. You may also be able to deduct year-end bonuses accrued in 2015 even if they aren’t paid until 2016 (provided they’re paid within 2½ months after the end of the tax year).
But deferring income and accelerating deductions isn’t the best strategy in all circumstances. If you expect your business’s marginal tax rate to be higher next year, you may be better off accelerating income into 2015 and deferring deductions to 2016. This strategy will increase your 2015 tax bill, but it can reduce your overall tax liability for the two-year period.
Finally, consider switching your tax accounting method from accrual to cash or vice versa if your business is eligible and doing so will lower your tax bill.
Something else to think about on the tax front as we approach year end is the upcoming deadline for the Affordable Care Act’s information reporting provisions for applicable large employers (ALEs). ALEs — generally those with at least 50 full-time employees or the equivalent — must report to the IRS information about what health care coverage, if any, they offered to full-time employees.
The reporting deadline is February 28 (March 31, if filed electronically) of the year following the calendar year to which the reporting relates. Smaller employers that are self-insured or part of a “controlled group” ALE will also have reporting obligations.
With the deadline approaching, now is the time for affected employers to begin assembling the necessary information. The compliance obligation will likely require a joint effort by the payroll, HR and benefits departments to collect the relevant data.
The IRS has developed new forms for this type of information reporting: Form 1094-C, “Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns,” and Form 1095-C, “Employer-Provided Health Insurance Offer and Coverage.” (A non-ALE self-insured employer should file Forms 1094-B and 1095-B.)
Uncertainty over expired tax breaks has been an issue with year-end tax planning for the past few years. Nevertheless, most steps to reduce your 2015 tax bill must be taken before year end. We can guide you through the uncertainty by helping you to implement the strategies available today and to be in a position to act quickly when tax legislation is signed into law.
A not-for-profit’s accounting function is its financial backbone. Efficient accounting processes along with sound controls to monitor them will put the organization on the right track for financial stability and growth.
Are you satisfied with your not-for-profit’s accounting function? Does it seem less efficient than you think it could be? Here are some suggestions for improving this important piece of your operation.
A good first step toward accounting function improvement is creating policies for the monthly cutoff of invoicing and recording expenses. For instance, require all invoices to be submitted to the accounting department by the end of each month. Too many adjustments, or waiting for tardy employees or departments to weigh in can waste time and delay the completion of your financial statements.
Another time saver: You may be able to spare days at the end of the year by reconciling your bank accounts shortly after the end of each month. It’s a lot easier to correct errors when you catch them early. Also reconcile accounts payable and accounts receivable data to your statements of financial position.
Designing a coding cover sheet is another step toward boosting efficiency. An accounting clerk or bookkeeper needs a variety of information to enter vendor bills and donor gifts into your accounting system. Speed up the process by collecting all of that information on one page. The cover sheet should list your not-for-profit’s general ledger account numbers so that the employee entering data doesn’t have to look them up each time.
Additionally, cover sheets should indicate whether the invoice is to be paid by check, electronic transfer or credit card and provide a place for the appropriate person to approve the invoice for payment. Use multiple-choice boxes to indicate which cost center the amounts should be allocated to. The invoice or copy of the donor’s check can be attached to the cover sheet for reference.
Another invoice tip: Don’t enter only one invoice or cut only one check at a time. Set aside a block of time to do the job when you have multiple items to process.
Many organizations underuse the accounting software package they’ve purchased because they haven’t invested enough time to learn its full functionality. If needed, hire a trainer to review the software’s basic functions with staff and teach time-saving tricks and shortcuts.
Become more efficient by avoiding any calculations or financial report presentations in Excel or other spreadsheet programs. Standardize the reports coming from your accounting software to meet your needs with no modification. This will reduce input errors and will also provide helpful financial information, not only at month end but throughout the year.
Consider performing standard journal entries and payroll allocations automatically within your accounting software. Many systems have the ability to recall transactions and can automate payroll allocations to various programs or vacation accrual reports. Make sure to review any estimates against actual figures periodically, and always adjust to the actual amount before closing your books at year end.
Accounting systems can become inefficient over time if they aren’t monitored. Look for labor-intensive steps that could be automated or steps that don’t add value and could be eliminated.
Make sure that the individual or group that’s responsible for the organization’s overall financial oversight (for example, your CFO, treasurer or finance committee) promptly reviews monthly bank statements, financial statements and accounting entries for obvious errors or unexpected amounts.
Make sure that you’re optimizing your accounting resources. Considering the growing list of tasks that arise, implementing one or more of the above processes can help free up valuable time. This will allow management to focus on larger projects or initiatives as well as the big picture.
If you have questions on how to make the accounting process in your not-for-profit more efficient, don’t hesitate to reach out to us.
The choices can be complicated — and errors can be costly. Business legal structures are regulated by state governments, but your county or municipality also may have license requirements. What’s more, current tax laws make it difficult to change your legal structure after you begin operating. Making the right decision before you open for business is very important. How do you decide which legal structure is best for you and avoid potential problems? Consult with a certified public accountant (CPA). A CPA can help you make well-informed choices, explain how business structure affects your organization’s bottom line and file the necessary paperwork to start your business, if you’d like.
We have included the basic pros and cons of each structure in the chart below.
This is a complicated subject. To learn more about each structure and how to compare and determine which one is right for your business, read or download our Guide to Selecting Your Small Business Legal Structure or contact your SKR+Co tax advisor. We are happy to answer your questions and help you make the best choice for your specific situation.
The Employer Shared Responsibility Provisions of the Affordable Care Act (“ACA”) went into effect for tax year 2015. If you haven’t already started doing so, we wanted to provide you with some guidance on what information an applicable large employer should be tracking monthly and reporting annually to help you meet reporting requirements for 2015.
Before going into too much new detail, it’s important to briefly review the employer mandate. Applicable large employers are required to comply with the Employer Shared Responsibility Provisions beginning in January 2015. For 2015, a company must employ 100 full-time and full-time equivalent employees to be considered an applicable large employer. That amount reduces for 2016 down to 50 full-time and full-time equivalent employees. Companies meeting these thresholds are required to offer minimum essential health coverage to at least 70% of full-time employees and their dependents to be compliant. In 2016 and thereafter, the percentage increases to 95% of full-time employees and their dependents.
For a more in-depth discussion of the Employer Shared Responsibility Provisions and a brief discussion of how to calculate full-time and full-time equivalent employees, please see our article published December 13, 2014, "Employer Shared Responsibility Provisions of the ACA are in Effect for 2015."
During 2015, applicable large employers need to track whether they offered full-time employees and their dependents minimum essential coverage that meets the minimum value requirements and is affordable. They also need to track whether their employees enroll in the minimum essential coverage that was offered by the employer. It is important to track this information because an employer could be subject to an employer shared responsibility payment if either:
The ACA requires that applicable large employers file information returns with the IRS as well as provide statements on healthcare coverage to full-time employees. Reporting this information was voluntary for 2014, but in 2015, all applicable large employers are required to file the reporting forms. It is important to note that the reporting requirements apply to ALL applicable large employers starting in 2015. This means that if your business has 50-99 full-time employees in 2015, and therefore qualifies for transition relief from the employer mandate because you have less than 100 full-time employees, you will still be required to file the forms for 2015.
Form 1095-C: “Employer-Provided Health Insurance Offer and Coverage”
Applicable large employers must provide Form1095-C to full-time employees. In addition, a copy of the form is filed with the IRS as an information return. This form is used by the IRS to help determine whether full-time employees are eligible for the premium tax credit, and it also helps determine if a business may potentially owe an employer shared responsibility payment. The following information is required to complete Form 1095-C:
Form 1094-C: “Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns”
Form 1094-C is filed as a transmittal document for Forms 1095-C, serving as a summary of the totals from Form 1095-C much as a Form W-3 serves as a summary of the totals from Form W-2. This form is used by the IRS to help determine whether an employer is subject to a shared responsibility payment and the payment amount.
The Employer Shared Responsibility Provisions of the ACA contain many new requirements for filing. In order to be compliant with the reporting requirements, an employer must first determine whether it will be considered an applicable large employer subject to the ACA mandate. If determined to be an applicable large employer, the next step will be to track information monthly on the health coverage offered and the employees participating in the health plan. This information is critical for applicable large employers to be able to provide the required information to their employees and the IRS.
On February 18, 2015, the Internal Revenue Service issued Notice 2015-17, which reiterates the conclusion in previous guidance addressing employer payment plans – that they are not in compliance with the Affordable Care Act (ACA). This article will discuss the additional guidance provided by Notice 2015-17, and it will also serve as an update to the article that Stockman Kast Ryan & Co. published on December 15, 2014 linked here:
https://www.skrco.com/what-the-affordable-care-act-means-for-reimbursement-type-plans/
Transition Relief for Small Employer Reimbursement PlansNotice 2015-17 states that employer payment plans, (plans that pay directly for or reimburse employees in part or full for health insurance) are considered group health plans that are not in compliance with the Affordable Care Act. However, the Notice does provide transition relief to small employers – those who are not Applicable Large Employers, meaning that they have less than 50 full-time or full-time equivalent employees. Small employers have until June 30, 2015 to transition their plan to one in compliance with the Affordable Care Act or be subject to excise tax under Internal Revenue Code §4980D. The excise tax is equal to $100 per day, per employee, or $36,500 per participant, per year.
The transition relief applies to:
1.Employer payment plans, as described in Notice 2013-54 (http://www.irs.gov/pub/irs-drop/n-13-54.pdf);
2.S Corporation healthcare arrangements for 2-percent shareholder-employees;
3.Medicare premium reimbursement arrangements;
4.TRICARE-related health reimbursement arrangements (HRAs).
Notice 2015-17 provides that the IRS is still contemplating publication of additional guidance on the application of market reforms to a 2-percent shareholder-employee healthcare arrangement. The good news for taxpayers is that until this guidance is issued, and in any event through the end of 2015, these arrangements will not be subject to the excise tax under Internal Revenue Code §4980D. In addition, S corporations with a 2-percent shareholder-employee healthcare arrangement will not be required to file Form 8928. Keep in mind that this relief does not apply to S corporation employees who are not 2-percent shareholders.
As discussed in the December article, the market reforms do not apply to a group health plan with less than two participants. For this reason, a plan covering only a single S corporation employee is not subject to the market reforms or the excise tax.
Arrangements that reimburse employees for Medicare Part B or Part D premiums are considered employer payment plans under IRS Notice 2013-54. Notice 2015-17 discusses that when an employer reimburses the cost of Medicare premiums and integrates this with another group health plan offered by the employer, then this is permissible under the market reforms.
However, this is permissible only if:
1.The employer offers a group health plan (other than the Medicare reimbursement arrangement) to the employee that does not consist solely of excepted benefits and offers coverage providing minimum value;
2.The employee participating in the Medicare reimbursement arrangement is actually enrolled in Medicare Parts A and B;
3.The Medicare reimbursement arrangement is available only to employees who are enrolled in Medicare Part A and Part B or Part D;
4.The Medicare reimbursement arrangement is limited to reimbursement of Medicare Part B or Part D premiums and excepted benefits, including Medicare premiums.
Notice 2015-17 confirms the argument that an employer may increase an employee’s taxable compensation, not conditioned on the purchase of health insurance, without creating an employer payment plan. Because this type of arrangement will not be considered a group health plan, it is not subject to the market reform provisions.
Unfortunately, the IRS has clarified that after-tax employer payment plans are, in fact, subject to excise tax under Code §4980D. An arrangement where an employer pays for or reimburses an employee for the cost of health insurance is subject to the market reform provisions of the Affordable Care Act without regard to whether the employer treats the money as pre-tax or post-tax to the employee.
The market reform provisions of the Affordable Care Act are continuously updating and taking shape as more guidance is received on the application of these rules from the IRS. Notice 2015-17 contains some important clarification on the employer reimbursement arrangements as well as transition relief through June 30, 2015 for some small employer plans. We will continue to update you as new information and guidance becomes available.
If you receive a notice from the Internal Revenue Service (IRS), don’t panic! The IRS frequently sends notices and they are usually very easy to address.
One situation we want to make you aware of is that the IRS has prematurely sent notices regarding the late filing of S-Corporation returns. This is simply a mistake within their system of one office not communicating with another. These notices are being generated from the first office before the second office has processed the extension of time to file the tax return. The notice usually lists the number of shareholders and shows a penalty for each shareholder of $195 multiplied by the number of months the return is shown as late. A penalty may be accessed for up to 12 months per shareholder.
If your S-corporation filed an extension yet you received a late filing notice, this issue can be handled by a call to the IRS or simply mailing a letter with proper documentation to refute their claim. You can handle this yourself or promptly forward the notice to your CPA and they can determine the best way to respond. If you choose to write a response yourself, please be sure to make copies and provide that detail to your CPA. It is important to reply within the allotted time frame to avoid further notices or penalties and interest on any balance due.
Often times the IRS sends notices that don’t require any response. If you receive a notice and are uncertain of what is required or you want assistance responding to the notice, contact your CPA promptly and they can help you understand what is needed and respond appropriately.
Form 1099-MISC is generally the most common 1099 prepared by businesses. This form reports payments made in the course of a trade or business to individuals and unincorporated businesses that do not constitute wages. The most common types of payments reported are royalty payments or payments to independent contractors for services or work. Below is a list of payments made by businesses that must be reported to recipients on Form 1099-MISC: