December 11, 2019
As a small to midsized business owner, you are subject to income tax, property tax and any other taxes relating to the activity or industry of your business. Read below for some trends in tax compliance that you should be looking out for as we approach the new year.
– Coding standards are becoming higher. Previously, the IRS did not impose any penalties for improper coding as long as the tax amounts and income were properly reported on the 1042-S form. Now, these standards are becoming higher. The IRS will now be imposing strict penalties for improper coding and is taking an audit-driven approach to making sure your financial information is up to date and you are making the proper payments.
– Tax data is going digital. Small to midsized business owners have a lot on their plate when it comes to communicating with suppliers and keeping track of forms and payments. In 2020, we will see a growing number of intelligence tools that automate tax data and make it easier for suppliers to keep track of payees’ coding and history. The software will ask suppliers a series of questions about their status and then guide them to the correct forms, which they can then distribute to the payees.
– Payments subject to withholding will be more clear-cut thanks to technology. Determining which payments are subject to withholding by employers and which are not is not always clear. Fixed, determinable, annual or periodic (FDAP) income is automatically subject to withholding, but payments that do not fall under these categories can be ambiguous. Payments to participating financial institutions are not subject to withholding, as long as the business owner has proof of that institution’s W-9. Without that, the institution would be classified as a non-compliant taxable entity, and any payments made to the institution would be automatically subject to 30% withholding. Software-based solutions could emerge in 2020 that make it easier to keep track of these important forms to avoid unnecessary withholding.
As you can see, 2020 will bring about some big changes in tax compliance procedures. Luckily, the team at Frank W. Kapitza & Associates is available to help you get your data together and make sure you are paying the fair number. Contact them today to get started.