Important End-of-Year Business Filing Reminders

January 5, 2021

If you have any questions about the information in this email or would like us to assist you in the preparation of your year-end filings, please call or email either Wendy Andrei at the Asheville office (828) 259-9900, [email protected] or Liz Brown at the Charlotte office (704) 676-6335, [email protected]

Shareholders owning a 2% or more interest in an S corporation must include group term life, health, long-term care, accident and disability insurance premiums paid on their behalf in their Form W-2 wages. Premiums that are considered self-employed health insurance, are deductible on the shareholder’s personal income tax return.

Fringe benefits are taxable to recipients unless specifically excluded by law. Taxable fringe benefits that are provided to employees are generally subject to employment taxes and are reported on Form W-2. The following is a listing of common types of taxable fringe benefits:

  • Personal use of company vehicles (click here for worksheet using the lease value method).
  • Reimbursement of employee business expenses (with no accountable plan)
  • Moving expenses

Use this form for reporting non-employee compensation amounts of $600 or more. These amounts were formerly reported on Form 1099-MISC in box 7. Continue to use Form 1099-MISC for other reporting requirements.

A business must issue a Form 1099-NEC to each person or unincorporated business to which you have paid:

  • At least $600 in professional service fees and nonemployee contractors.
  • Payments to attorneys for legal services of $600 or more – regardless of their incorporation status.

As a general rule, you must issue a Form 1099-MISC to each person or unincorporated business to which you have paid:

  • At least $600 in rent.
  • At least $600 prizes and awards or other income payments.
  • Royalties of $10 or more.
  • Gross proceeds paid to attorneys not reported on 1099-NEC

There are penalties which range from $50 to $270 per return or statement associated with the late filing, non-filing, and incorrect filing of forms. The penalty for intentional disregard is a minimum of $550 per return.

To ensure you have the proper information for filing 1099s on time, every qualifying vendor should fill out and sign a Form W-9 before they begin work. The W-9 should be retained in your tax records. For the current form click here.  Please note: A sole proprietor or single member LLC that files their business information on a 1040 return, must provide their name on Line 1 and their personal Social Security number in Part 1.

Note: If a vendor has an ITIN, additional federal and state withholding requirements may apply.

An ITIN (Individual Taxpayer Identification Number) is a tax processing number issued by the Internal Revenue Service (IRS). An ITIN is a nine-digit number and always begins with the number 9 and has a 7 or 8 as the fourth digit, for example 9XX-7X-XXXX.

North Carolina requires withholding on payments made to contractors who do not provide a taxpayer identification number, nonresident contractors and ITIN contractors. Click here for additional information.

The requirements for filing information returns in North Carolina are generally the same as the federal requirements noted above, with the following exceptions:

  • 1099-NEC and 1099-MISC forms without North Carolina withholdings are not required to be filed with the state.
  • Forms such as the NC-3 Withholding Reconciliation and 1099s that report withholdings should be filed electronically. If you are unable to file these forms electronically you can use Form NC-5501, Request for Waiver of an Information Return Penalty. Click here for Form NC-5501

The Employee Retention Credit (ERC) is an incentive created by the CARES Act to encourage employers to keep employees on the payroll. Eligible employers are entitled to a refundable payroll tax credit equal to a percentage of eligible wages. Upon issuance of the ERC regulations, eligible employers were required to choose between the ERC and obtaining a Payroll Protection Program (PPP) loan. That requirement is no longer applicable and eligible employers can now participate in both programs.

Carter can help:

  • Determine your eligibility
  • Calculate and document qualified wages
  • Coordinate with other government programs, including the Payroll Protection Program
  • Assist with procedural requirements to claim the credit

The Affordable Care Act (ACA) requires employers’ reporting of certain health insurance coverage amounts. While most reporting requirements apply only to “Applicable Large Employers” (those employers with an average of 50 or more employees), you may be subject to the reporting requirements even if you have less than 50 employees. Certain health reimbursement arrangements, such as reimbursement of health insurance premiums for S Corporation shareholders, may be subject to these reporting requirements.

All businesses are required by North Carolina General Statutes to list business personal property with each county in which the property is located. This is also true for business personal property held in counties in other states.

Business personal property is any tangible property owned, claimed, used, possessed, managed or controlled in the conduct of a trade or business. This includes all machinery, fixtures, office furniture and equipment.

We have recently seen counties in North Carolina and other states place a heightened emphasis on enforcement regarding the filing of business property tax listings. This has resulted in more businesses being audited and fined for not filing the required returns.

States throughout the country continue to take more aggressive stances with sales tax matters. Most states now require collection of sales tax if you make sales or provide services in the state, even if you do not have a physical presence in the state. Please contact our office if you want to discuss in more detail how these sales tax changes affect your business.