Monday, August 16^th, final 6050W (reporting on payment card and third party network transaction) regulations were issued by the Internal Revenue Service.  These regulations are aimed at creating new reporting and withholding requirements for  financial institutions and service providers that settle card payments to merchants. 

New for tax year 2010, companies will have to file information returns with the IRS for incentive stock option (ISO) and employee stock purchase plan (ESPP) transactions. The returns must be filed on Form 3921 for ISOs and Form 3922 for ESPPs.  The deadline for filing these forms on paper is February 28, 2011, and March 31, 2011, if filing electronically.  The deadline for distributing the statements to employees is still January 31.

As we suspected, we are starting to see the pushback by foreign financial institutions to the FATCA regulations passed in March of this year.  FATCA is putting a new set of reporting and withholding responsibilities on US and Foreign entities that are facilitating US source income being directed abroad.  FATCA is just one example of an effort by the current administration to crack down on US income being sheltered from taxes through abroad tax havens.

The Tax Information Reporting Industry continues to see constant change in 1099 compliance rules and regulations- Corporate Reporting, Merchant Reporting, Cost Basis Reporting, Foreign Account Reporting, Potential Penalty Increases – to name just a few.

The Congressional Research Service has published a summary of the changes to form 1099 reporting that is very handy. You can find Form 1099 Information Reporting Requirements as Modified by the Patient Protection and Affordable Care Act online as a PDF. This is a helpful 9-page summary of current and proposed changes with some commentary on parts of both current and future regulations.  There are many interesting thoughts in here, including reassessing the $600 threshold for reporting.

As a follow-up to our post on August 5th which highlighted Trends in Compliance activities as reported by TIGTA, here is an Examiner.com article  published August 2nd, which does a good job of explaining why the Congress and the IRS are spending much of their time on Tax Gap legislation and enforcement activities.  Closing the Tax Gap continues to be the most viable alternative for raising revenues.

In June of this year, the Treasury Inspector General for Tax Administration (TIGTA), an independent IRS oversight branch, issued their report Trends in Compliance Activities Through Fiscal Year 2009.  The report noted that while the total number of tax returns and dollars collected increased, gross collections actually declined by 15% in 2009.  This decline represents a $2 trillion (that’s with a T) shortfall.

Having just participated in several recent industry conferences and shows, Convey is more aware than ever that the Tax Information Reporting Industry continues to see constant change in 1099 compliance rules and regulations- Corporate Reporting, Merchant Reporting, Cost Basis Reporting, Foreign Account Reporting (FATCA), Potential Penalty Increases – and the list goes on. 

Last week, Convey presented a webinar addressing the impact of the new tax information reporting changes on Accounts Payable departments due to recent changes to 1099 reporting introduced in the Healthcare reform bill in March (e.g. elimination of the Corporate exemption and reporting on payments of “goods” as well as services).  John Adams and Jeff Cronin, from Convey’s Product Management team, outlined the additional work effort around vendor master file clean up, how long the process will likely take, and what the penalties can be for non-compliance.  They also took the time to introduce Taxport A/P, the newest tax information reporting solution in the Convey family of services. Convey’s Tax Identity Management services and Taxport A/P have been designed specifically for Accounts Payable professionals to help them manage the increased vendor/supplier reporting. 

Last week the Senate proposed a Small Business Jobs Act that includes provisional changes to Tax Information Reporting.  The changes to 1099 reporting are included in the bill as a way to generate revenues to fund the bill and close the Tax Gap.