Every year, the Internal Revenue Services (IRS) brings about changes to various tax forms as well as new forms in order to improve the reporting process, and make it more systematic to reduce errors. For the 2015 tax year the IRS implemented changes to forms such as the W-2 and 1099, and introduced a few new reporting requirements.
As a taxpayer, it is important to be aware of these changes as even though you may rely on a tax preparer to file your tax return, you are still personally liable for all taxes and penalties in addition to the accuracy of the information provided. Additionally, since the taxpayer is the first person to receive forms, such as the W-2, and 1099, any error can be rectified prior to filing your tax return if you are aware of the requirements of the form.
US Tax Form W-2
For the 2015 tax year and onwards, the Social security Authority (SSA) will reject Form W-2, electronic and paper wage reports if medicare wages and tips are less than the sum of social security wages and social security tips. Also, the SSA will reject the form if social security tax is greater than zero and social security wages and tips are zero; as well as when medicare tax is greater than zero, and medicare wages and tips are zero.
A W-2 will also be rejected if the sum of social security wages and social security tips are less than the minimum yearly earnings subject to social security and Medicare tax withholding for a household employee, and if the Medicare wages and tips are less than the minimum yearly earnings subject to social security and Medicare tax withholding for a household employee.
Certain Medicaid waiver payments are excludable from income for federal income tax purposes.
The SSA will notify the submitter by email or post to correct the report and resubmit it to the SSA if the above issue occurs in an electronic wage report; and to the employer if the error is on a paper wage report.
Note: The fair market value of virtual currency (such as Bitcoin) paid as wages is subject to federal income tax withholding, Federal Insurance Contributions Act (FICA) tax, and Federal Unemployment Tax Act (FUTA) tax and must be reported on Form W-2.
US Tax Form 8922, Third-Party Sick Pay Recap
Form 8922 replaces the Third-Party Sick Pay Recap Form W-2 and Third-Party Sick Pay Recap Form W-3. For wages paid in 2015, Form 8922, Third-Party Sick Pay Recap, will be used to report total third-party sick pay wages paid to employees when liability for the employer and employee portions of Federal Insurance Contributions Act (FICA) taxes on the wages is split between the employer for whom services are normally rendered and the third party payer. This form is filed with the IRS and not with the SSA.
US Tax Form 1042-S, Foreign Person’s US Source Income Subject to Withholding
For withholding agents that report amounts withheld by another withholding agent (in box 8), it is mandatory from tax year 2015 onwards that details of the primary withholding agent (name and EIN) should be reported on Form 1042-S in boxes 14a and 14b.
In case of substitute forms, withholding agents that furnish a substitute Form 1042-S to the recipient must furnish a separate substitute Form 1042-S for each type of income or payment. Withholding agents are no longer permitted to combine all income and payments on a single substitute Form 1042-S and all fields on the substitute form must match the copy filed with the IRS.
Account-by-account reporting for US financial institutions: For amounts paid on or after January 1, 2016, a US financial institution will be required to report payments of the same type of income (as determined by the Income code in box 1) made to multiple financial accounts held by the same beneficial owner on separate Forms 1042-S for each account. For a sale of a debt instrument that meets these conditions, enter code “W” in box 1f and the amount of the wash sale loss disallowed in box 1g.
US Tax Form 1099-DIV
FATCA filing requirements of certain foreign financial institutions (FFIs)—Beginning in 2014, an FFI with a chapter 4 requiremnt to report a US account maintained by the FFI that is held by a specified US person may satisfy this requirement by reporting on Form(s) 1099. Additionally, a US payer may satisfy its chapter 4 requirement to report such a US account by reporting on Form(s) 1099. Form 1099-DIV is among the Forms 1099 used for such purpose. A new check box was added to Form 1099-DIV to identify an FFI filing this form to satisfy its chapter 4 reporting requirement.
US Tax Form 1099-INT and 1099-MISC
For reporting bond premium on tax-exempt bonds on form 1099-INT—Box 13 was added. All later boxes were renumbered.
FATCA filing requirements of certain foreign financial institutions (FFIs)—Beginning in 2014, an FFI with a chapter 4 requirement to report a US account maintained by the FFI that is held by a specified US person may satisfy this requirement by reporting on Form(s) 1099. Additionally, a US payer may satisfy its chapter 4 requirement to report such a US account by reporting on Form(s) 1099. Forms 1099-INT and 1099-MISC are among the forms used for such purpose. A new check box was added to Forms 1099-INT and 1099-MISC to identify an FFI filing this form to satisfy its chapter 4 reporting requirement.
Additional Reporting for Affordable Care Act Individual Mandate
There are additional mandatory reporting requirements under the Affordable Care Act (or Obamacare), which requires the health insurance coverage provider and the employer to provide certain information returns, such as: Form 1094-B, 1095-B, 1095-C to the insured. (Read: Forms To Be Filed For Affordable Care Act Compliance for more details)
Aylett Grant Tax LLP
If you have any other tax-related queries, and/or need assistance with tax planning/filing please contact AG Tax. Our tax professionals are highly-experienced with US and Canadian tax laws and can provide you the right guidance to handle your tax situation.
Aylett Grant Tax LLP is a full service accounting firm with a dedicated team of experts, who are highly-qualified and experienced in handling situations related to US, Canada and other international tax laws.
We can assist with:
- Canadian Personal and corporate tax returns
- Cross Border Taxation and Business Planning
- Personal and Corporate Taxation
- Disclosure of Foreign Assets and other information filings
- Retirement planning
- Estate Planning, Inheritance tax advice
To obtain a quote or to arrange for a consultation to discuss your tax related queries, please contact us at:
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Disclaimer: The information in this publication is accurate as of the time of its publication. AG Tax assumes no responsibility for changes to tax legislation subsequent to the publication of this document. The information provided is for general information purposes only and should not be acted upon without seeking professional advice. If you would like to engage our services, please contact our staff and obtain authorization to send our firm confidential information. A client relationship is not created by the transmission of information. A client relationship is only formed with our firm when a scope and engagement letter signed by the firm and the potential client detailing the terms of engagement is present.
