Past year-end flubs resurfacing: Is Finance ready to handle them?

As the last quarter of 2018 begins, you’re likely already beginning to prepare for the coming year-end. But before forging forward, IRS will require many companies to take a lookback at last year-end.

The Service is in the process of sending notices concerning companies’ information return accuracy (1099s, 1042-Ss, etc.). And they could be arriving in your mailbox any day.

What should your Finance staff be looking out for? According the compliance experts at Sovos, IRS has already sent the first round of 972CGs (Notice of Proposed Penalty) and will send CP2100s next.

In preparation, you’ll want to see that A/P keeps an eye on the mail and, in the event a notice arrives, knows exactly how to respond.

The finer points

If your company get any 972CGs (Notice of Proposed Penalty), it means you had information returns that were filed:

• after the due date
• on incorrect media (e.g., more than 250 forms on paper), or
• with missing or incorrect taxpayer identification numbers (TINs).

The notice will explain the penalty and how you should respond.

If you receive CP2100s, your forms had missing or incorrect TINs. Here’s how A/P should handle each:

• Missing TINs: Backup withhold at a rate of 24% until you secure accurate TINs.
• Incorrect TINS: Compare accounts with your records. If they match, send the vendor a B Notice. If they don’t match, correct your records.

Moving forward

If you do receive any IRS notices this fall, you’ll also want to make sure those same stumbling blocks don’t trip your team up again. Staffers should take what they’ve learned from last year-end’s errors and apply it for the coming year-end.

A short meeting to go over the notices could do the trick. See where errors occurred (Forms 1099? Forms 1042-S?), why they occurred (Was it A/P’s fault? The vendor’s fault?) and discuss how staffers can prevent them from happening in the future.

For example, if A/P filed forms that contained incorrect vendor TINs, ask questions like, “When was the last time that vendor’s W-9 information was verified?” and “Did any staffer use IRS’s TIN matching tool to check for accuracy?”

The goal for staffers: They take what they learned and avoid similar mistakes going forward.

And the bigger goal for your company: The next time IRS sends notices, your mailbox remains free of them. No “last year-end lookback” required.

Info: For more, see IRS Nationwide Tax Forum 2017 at irs.gov/pub/irs-utl/2017ntf-irsnoticesafterinformationreturns.pdf