Episode 23: Ask the Expert, Volume 1

 In this recurring feature, we tackle various questions that people have submitted recently about 1099s and 1042-S. This episode:

--The draft of a new W-9: can you use it?
--Is FIRE really being shut down? What about file formatting in IRIS?
--Does the credit card exception apply to Form 1042-S?
--What if a vendor checks box 3b on the W-9? 

Transcript

SPEAKER_00 0:00

This week on Information Return Intelligence, we answer real questions submitted by people over the last few months relating to 1099's 1042s, the W9, LLCs, and more. Information Return Intelligence is sponsored by IOFM. Welcome to another episode of Information Return Intelligence. I'm Jason Dynason. This is a fast-moving weekly podcast where we talk about all things related to information returns. This week we're going to go through some real questions that people have submitted about information returns, questions, and answers. And we'll do this periodically. By the way, our sponsor is IOFM, and we do this all the time at IOFM.com. If you're an IOFM member, you get access to the Ask the Expert feature, which allows you to submit your toughest questions and have me answer them. This is a collection of questions, not just from that, but just in general. So in this segment on information return intelligence, which we will make a recurring segment. This is the first time we've done it, but we'll do it on a recurring basis. This is a mix of questions sent into IOFM. It's also questions that people have asked during webinars that I've been teaching in various different places and just things that have come up that people have asked about. So let's get started. Can we allow the new form? When is the IRS expected to have the new form available? So the answer to this question is a resounding no. The official version of the W9 is the one that says March 2024 on it. The other form is a draft and should not be used. The IRS has not said what their timeline is for releasing that draft that we know is out there. We've talked about it many times on this show. We don't know what their timeline is. They'll release it at some point, or they might not, although I think they probably will actually go forward with releasing it, but we don't know when. And we've talked about a couple of times in recent weeks how publication 1099, the draft of that for 2026, makes it pretty clear that they're going to shut FIRE down and you'll have to use Iris. To set yourself up on Iris, you'll need a TCC. The one that you use with FIRE will not work on Iris. Iris also does not use the same file formats as FIRE. So when you use Iris, you have two choices. You can use what's called the taxpayer portal, and there you can upload CSV files, which sounds like it might not be so bad. The IRS even gives you a template that you can use. The limitation here is that your CSV files can contain no more than 100 entries at a time. So if you're filing a thousand forms and you wanted to use Iris Taxpayer Portal, you'd have to create 10 separate CSV files and upload them. Now, if you're doing fewer than 100 forms, that's no big deal. You put them all in one CSV and send it off and you're done. And it's just a CSV file. When you get past 100, it starts to become more cumbersome because it's only batches of a hundred that you can do. Your other option is to use what's called the iris application to application system, which allows you to upload any number of forms at one time, but the forms have to be in XML format. IRS Publications 50717 and 50718 are the publications that give you information about these two systems and how to get yourself set up on them. And before we go further, let's take a quick break to tell you about our sponsor, the Institute of Finance and Management, IOFM. Financial Operations Professionals, that would be people in accounts payable, procurement, procurement to pay, accounts receivable, credit and collections, anything in the finance realm in an organization, are facing mounting pressure to improve performance. Cash needs to be paid and collected faster. Compliance regulations, which that's information forms. Those rules are always changing, and there's always penalties, plus, there's threats of fraud and abuse and just problems with all of these things. Information forms, accounts payable, accounts receivable, it's all more difficult now than it's ever been. And that's where IOFM comes into play. There are over 10,000 members of IOFM. If you're interested in this field, which you must be if you're listening to this podcast, IOFM is the place to be. Check them out at IOFM.com and become a member. And now back to the show. Next question: We have two foreign vendors that we work with, but we pay them with a credit card. Do we still have to do 1042s reporting on those vendors? Or does the credit card company take care of reporting like they do with 1099s? The answer here is you still have the 1042s obligation. The exception to reporting when you're using a credit card only applies to payments to US vendors and form 1099 reporting. It doesn't apply to 1042s. Next question: What additional information do I need to ask a vendor if they check box 3b on a W9? So box 3B, maybe we can devote an episode to that down the road. That is asking about foreign ownership, basically. I'm giving you like the I don't even know if it's the 40,000-foot view. That might be like the view from outer space or something. But it has to do with whoever's filling out the W9, if they have foreign owners, they check that box. And what the real upshot of this is, is that box 3B really is intended for partnerships. If your organization is a partnership, you should be getting a W9 from your partners. And if that partner provides you back a W9 with Box 3B checked, then you'll need to consult with whoever prepares the partnership tax return, form 1065, as this creates implications and complications with that, with filings called Schedule K2 and Schedule K3. Now, while that box really only needs checked in certain situations, the reality is, you know how it is, you might have just a run-of-the-mill independent contractor checking that box sometimes. If they do, you need to stop and ask them why they checked that box, because that box means foreign owners, which call into question whether W9 is the proper form or if you need to get a W8. And as you can imagine, that opens an entirely different can of worms. We'll stop there for today, but we'll keep doing this. We have literally hundreds of questions that we can pick through to talk about. These are just some that I chose. And we'll do this every now and then on Information Return Intelligence, sponsored by IOFM. We'll talk to you again next week. Time us up Media Adventures.