1099 Letter
January 1, 2017 Dear Client: THE FOLLOWING ARE VERY IMPORTANT DATES IN THE TAX LAW:
The rule for outside contractors or any other individual who earns at least $600.00 per year, must be reported to the IRS on form 1099 Miscellaneous by January 31st 2017. There may be a $250.00 penalty for each form omitted. The State can disallow the total deduction and apply a penalty if form 1099 is not filed. Also, the EDD can impose a penalty of $24 for failure to report and if intentional, a penalty of $490 may be imposed. Remember, this only applies to individuals (not corporations) who do not have any taxes deducted from their checks such as outside sales people, maintenance people, gardeners, etc. (This pertains to business and apartment owners.)
Record keeping requirements for 2017: The burden of proof for proving business travel, automobile, entertainment, promotion and gift expenses are still on the taxpayer. The best way to prove the aforementioned expenses is to maintain adequate contemporaneous records to substantiate the deduction or credit and to keep for at least seven years. For example:
A. Mileage and entertainment expense can be kept in a daily log or calendar that list business mileage and the appropriate entertainment data.
B. Keep all receipts. Please note-records do not have to be contemporaneous records according to new regulations, however, this is still the best way to keep adequate records.The new standard business mileage rate for 2017 is 53.5 cents per mile.
3.The combined Social Security and Medicare tax rate for 2017 remains at 7.65% for employers and employees.
A. The FICA ceiling is $127,200 for 2017. B. The Medicare has no limit on the amount of earnings
Subject to tax (1.45%). C. SDI is .9% and ceiling is $110,902 for
2017. Maximum contribution is $998.12. If you have any questions regarding the above, please give us a call.
Sincerely, William L. Bingley, CPA