Is the new 1099-K tax form going a little too far?
The new 1099-K aims to shine a light on a currently hard-to-track payment stream: credit cards. Starting in 2011, financial firms that process credit or debit card payments will be required to send their clients, and the IRS, an annual form documenting the year’s transactions.
The 1099-K is only required when a merchant has at least 200 payment transactions a year totaling more than $20,000.
The IRS has a draft version of the 1099-K form available now for public feedback, and will begin requiring the form’s use next year. The additional 1099 requirements take effect in 2012. The agency is in the process of drafting its guidance on them.
As well, the 1099-Misc is having its role changed from a form for tracking off-payroll employment to one that must accompany virtually any sizeable business transaction brginning in 2012.
IRS Remitting and Reporting requirements for U.S. sourced income securities:
•For a US holder that is W9 certified- no IRS backup withholding tax. They receive a 1099DIV form
•For a US holder without a W9 submitted – 28% IRS backup withholding tax needs to be deducted. They receive a 1099DIV form
•For a non-US holder that is W8 certified – IRS NRA tax will be deducted based on the maximum 30% rate or US treaty rate, if applicable – They recieve a 1042-S
•For a non-US holder without a valid W8 – 30% IRS NRA tax will be deducted. They receive a 1042-S.
The purpose of the T5008 information slip is to report the amount paid or credited to an investor for securities disposed of or redeemed during the year.
Firms that issue T5008 slips generally report only the “proceeds of disposition” (box 21) and not the “cost or book value” (box 20) on the slips since the cost is often either not known or tracked by many brokerage firms. Therefore the onus is on the investor — perhaps with your assistance — to track their own tax cost or adjusted cost base of the securities held, in order to accurately report the capital gain or loss on his or her tax return.