January 2015 Edition of Indian Tribal Governments News
- Director’s message
- Indian Tribal tax provisions extended through 2014
- Reporting Tribal (per capita) distributions on your 2014 return
- The Affordable Care Act: Individual Shared Responsibility Provision Exemptions
- The Affordable Care Act: Provisions for Employers
- Common errors found on Form 1099-MISC
- Helpful hints for year-end reconciliation
- Mailing forms W-2, W-3, W-2C and W-3C
- Tax year 2014 filing deadlines for Forms W-2 and 1099
- IRS tax volunteers
- Outreach update
- Arizona training opportunities
We’ve had a busy year, and a great way to close it was to be able to attend the annual White House Tribal Nations Conference last month. As part of the conference, I had the opportunity to participate in a Treasury Department listening session where we discussed the Tribal General Welfare Exclusion Act and other tax matters. I was also on a panel that discussed self-determination, treaty and trust responsibilities. And the IRS Commissioner hosted tribal leaders to discuss tax administration issues affecting Indian tribal governments. This is all part of our commitment to continue building upon and strengthening the government-to-government relationship with Indian Country.
This edition focuses on preparing you for the filing season. We hope that you will find the information helpful. As always, if you have questions, comments or concerns, please don’t hesitate to contact us or your ITG Specialist.
Indian Tribal Governments Director
Indian Tribal tax provisions extended through 2014
The Tax Increase Prevention Act of 2014 has extended through 2014 the following tax provisions for Indian Tribes:
- The Indian employment tax credit – see the January 2014 edition of ITG News.
- Accelerated depreciation of qualified leasehold improvement, restaurant and retail improvement property, of motorsports entertainment complexes, and of business property on Indian reservations.
- The tax credit for producing electricity using Indian coal facilities placed in service before 2009.
Reporting Tribal (per capita) distributions on your 2014 tax return
Note to Tribes: ITG encourages you to include this article when sending Tribal members their Form 1099-MISC.
If you are a member of a federally recognized tribe, you may receive taxable distributions from your tribe. The tribe must report these distributions to the IRS and to you on Form 1099-MISC.
If you are expecting a refund, correctly preparing your 2014 federal tax return may help avoid refund delays. Please make sure that you include information from your Form 1099-MISC when you file.
Follow these instructions when filing your 2014 federal income tax return:
- Use Form 1040; not Form 1040A or Form 1040EZ
- On Form 1040, line 21, enter the amount of tribal distributions from Form 1099-MISC, Box 3
- On Form 1040, line 21, include a description of the income in the space provided on Line 21
- To avoid processing delays, enter one of the following descriptions on Line 21:
- INDIAN GAMING PROCEEDS
- INDIAN TRIBAL DISTRIB
- NATIVE AMERICAN DISTRIB
- Spell the descriptions exactly as listed above. These descriptions facilitate the processing of your tax return. For example, if you spell out DISTRIBUTION rather than using DISTRIB, the IRS may reject your return and delay your refund.
If you receive a letter requiring a response from you, respond to the letter in a timely manner. Do not ignore it. While the correct descriptions shown above are important, it is crucial you respond timely to any letter requesting your response.
Some letters do not require a response. These are called notices. Notices are sent by the Internal Revenue Service to inform you of the length of time your refund is expected to be delayed.
The IRS’s hard work to protect taxpayers from fraud and identity theft may delay refunds for Tribal members. All tax returns are subject to the refund fraud and identity theft filters. There are NO exceptions.
Although this diligence has affected everyone, ITG has gotten involved and the IRS has made strides in streamlining refunds. With automated processes and your following the guidelines in this article, the number and length of delays should be reduced.
Affordable Care Act – Individual Shared Responsibility Provision Exemptions
You may be able to claim an exemption from the Individual Shared Responsibility Provision if you meet either of these two criteria:
- You were a member of a Federally-recognized Indian Tribe.
- You were eligible for services through an Indian health care provider or the Indian Health Service.
There are two ways you can claim the exemption:
- Fill out the application for exemption and mail it to the Marketplace address on the form. You will need to include supporting documentation.
- Claim it on your 2014 federal income tax return by filling out Form 8965. This option does not require you to provide supporting documentation to the IRS but you should keep any relevant documentation for your records.
IRS Individual Shared Responsibility Provision-Exemptions
Publication 5172, Facts about Health Coverage Exemptions
Affordable Care Act: Provisions for Employers
Tribal employers may have reporting requirements under certain circumstances under the Affordable Care Act. For the latest information about the coverage, reporting and payment, and provisions related to both small and large employers, visit the IRS Affordable Care Act Provisions for Employers web page.
Common errors found on Form 1099-MISC, Miscellaneous Income
Preparing the Form 1099 correctly will ensure that you avoid mismatch and other penalties. Below are common errors and helpful tips for filling out the Form 1099 correctly:
- Payments made to an LLC. Many assume that this is a “Limited Liability Corporation” but it is actually a “Limited Liability Company,” which can be organized as a single member LLC, a partnership, or elect to be treated as a corporation. Those entities organized as single member LLCs or partnerships receive a Form 1099. Clarify with the vendor if they have elected to be treated as a corporation. If you are unsure, issue a Form 1099.
- Report combined payments to attorneys of $600 or more on a Form 1099 even if they are incorporated.
- Report combined payments of $600 or more for medical services for qualified medical services even if the entity is incorporated.
- Payments made on behalf of tribal members or for tribal members. Although many payments of this type are not taxable to the tribal member, they are taxable to the one who receives the payment. Here are two examples:
- Emergency rent payment on behalf of a tribal member - while not taxable to the tribal member, it is taxable to the landlord. You should report it and issue a Form 1099 to the landlord.
- Tuition payment for a tribal member. The payment may be qualified tuition and not reportable as income by the tribal member, but the non-incorporated school would still receive a Form 1099 with the income reported in Box 7, nonemployee compensation. The education is a service provided to the tribal member.
- Scannable Forms - do not file Copy A of information returns downloaded from the IRS website. The official printed version of the IRS form is scannable, but the online version of it printed from the website, is not. A penalty may be imposed for filing forms that cannot be scanned.
- Payments to corporations. If you make a payment to a corporation, they do not receive a Form 1099 unless the vendor is an attorney or law firm, or a medical provider including hospitals, doctors, clinics, etc.
Payments to employees. If you have an employee that is receiving a Form W-2, Wage and Tax Statement, they should not get a Form 1099 unless they have a separate business for which the payment is made, or if they receive a pow wow prize, or some other prize that is unrelated to their work. The fair market value of property that an employee receives is includible on their Form W-2 if related to their work.
- Payments to Tribal Council members. Although they do not pay social security and Medicare, the payments should always be a on a Form W-2, not a Form 1099. See Pub. 4268, ITG Employment Tax Guide, for more information.
- Ensure that the correct name is on Form 1099. When the vendor provides an SSN on the Form W-9, then the business owner’s personal name goes on line 1 of the form. If the W-9 lists an Employer ID Number (EIN), then the business name goes on line 1of the Form 1099. Putting a business name with an SSN or a personal name with an EIN will result in getting a mismatch notice.
Be sure to file a Form 1099 for vendors for services. Below are some examples:
- Vehicle repair service or any other repair service not provided by an employee.
- Rental items such as party tents for special events, equipment, and other items if the company is not incorporated.
- Pest control services
- Water delivery services (not incorporated)
- Towing services
- Landscaping and/or snow removal services
- Cleaning services if the cleaning is not performed by an employee
Placing the payments in the correct box is an important part of ensuring you complete the Form 1099 correctly. It is especially important to make sure that only payments for non-employee compensation (when someone has performed a service) go in Box 7. Any payments reported in this box will require the recipient to pay self-employment tax. See the instructions for Form 1099 for more details.
Below are a few tips:
- Services performed by independent contractors or others (not employees of your business) (Box 7)
- Prizes and awards and certain other payments (see Instructions for Form 1099-MISC, Box 3. Other Income, for more information)
- Rent (Box 1)
- Backup withholding or federal income tax withheld (Box 4)
- Crewmembers of your fishing boat – if their income is taxable (Box 5)
- To physicians, physicians’ corporation or other supplier of health and medical services (Box 6)
- Gross proceeds of $600 or more paid to an attorney (generally, Box 7, but see instructions as Box 14 may apply)
- Taxable payments to tribal members (Box 3)
Helpful hints for year-end reconciliation
Please read the January 2014 edition for more information.
Mailing forms W-2, W-3, W-2C and W-3C
Please read the January 2014 edition for more information.
Tax year 2014 filing deadlines for Forms W-2 and 1099
Form W-2, Wage and Tax Statement
You must file a paper copy (Copy A) and a Form W-3 with the Social Security Administration (SSA) by March 2, 2015. Those filing an electronic copy of Form W-2, which includes employers required to file 250 or more, have until March 31, 2015, to file with SSA. You must also provide Copies B, C, and 2 of Form W-2 to your employees by January 31, 2015.
Form 1099, Miscellaneous Income
Like the Form W-2, you must file a Form 1099 paper copy (Copy A), along with a Form 1096, by March 2nd. For electronic copies, including those required to file 250 or more, the deadline to file is March 31st. Finally, you must provide a copy of the Form 1099 (Copy B) to the payee by February 2nd.
For more information about which forms you should file, read the following articles:
IRS tax volunteers
Help your tribal community by preparing taxes free of charge and become a volunteer with the Volunteer Income Tax Assistance (VITA) or Tax Counseling for the Elderly (TCE) Programs.
Pacific Northwest - Anchorage, Alaska
Advanced Payroll Topics Workshop at the IRS Anchorage office. Held November 17-20, 25 representatives from 19 tribal governments attended along with three attendees from two regional nonprofits and one city. Other presenters included the state of Alaska Department of Labor and Workforce Development. They provided two guest speakers - one from Wage and Hour Administration who discussed labor laws dealing with the payment of wages to workers and a second from Employment Security who discussed unemployment taxes. A third guest speaker from the Alaska State Troopers discussed fraud awareness. The workshop covered topics that included scholarships, loans to members, fringe benefits, and more.
ITG also gave morning presentations during the Bureau of Indian Affairs (BIA) Providers Conference held December 2-4 at the Dena’ina Civic and Convention Center. Ninety-two attended representing sixty-six tribal governments, four regional nonprofits, and the State of Alaska. All received guidance on year-end filing requirements, Forms 1099 and 1096 and common errors.
Employment Tax and Gaming workshops, Norman Public Library, Norman, Oklahoma. The Norman Public Library provided a conference room November 12 - 13 for employment tax training and November 18 - 19 for gaming outreach. ITG specialists from the IRS Oklahoma City office provided the training. More than 30 attended the employment tax workshop; more than 20 attended the gaming outreach despite the bad weather. Twelve tribes were represented at the employment tax workshop and 11 participated in the gaming workshop. Covered topics for the employment tax training included contractor vs. employee, tribal council pay, election workers, payroll taxes, travel and other business expenses, TIN mismatch notices, fringe benefits and more. Topics covered in the gaming outreach included Forms W-2G, 1099-MISC, 1042, 730 and 11-C; tip agreements, Publication 3908, the Bank Secrecy Act, and acceptable forms of ID. Guest speakers included Taxpayer Advocate, Collection Division and Social Security Administration. ITG intends to offer these classes every year in the Oklahoma City area and the Tulsa area.
Gaming Workshop Tohono O’odham Nation, Tucson, Arizona. Twenty-eight casino management representatives attended the workshop held on July 11, 2014. An ITG specialist from the Tucson IRS office covered Title 31 issues of interest to management.
Excise Virtual Workshop, virtual. Fifteen representatives from various tribes participated in an online webinar workshop held on July 23, 2014. ITG specialists from the Mesa and Tucson IRS offices discussed when it would be appropriate to request Excise Tax Claims for refunds. Covered topics included filing fuel claims for gasoline and diesel using Form 8849 and Schedule 1, Publication 510, Excise Taxes (Including Fuel Tax Credits and Refunds), an overview of Revenue Ruling 94-81 and Exemption Certificates.
Title 31 Workshop, Tohono O’odham Nation, Tucson, Arizona. Forty representatives from the Nation’s Gaming Office attended the workshop held on September 2, 2014. An ITG Specialist from the Tucson IRS office presented topics included historical background, suspicious activities and money laundering, and recordkeeping requirements.
Title 31 Workshops, San Felipe Casino Hollywood, San Felipe Tribe. Two hundred and twenty one employees attended the workshops held on September 3 and September 4, 2014. An ITG specialist from the Albuquerque IRS office presented covered topics including historical background, suspicious activities and money laundering, and recordkeeping requirements.
End of Year Reconciliation Workshop, virtual. One hundred and thirty seven representatives from various tribes participated in an online webinar held on September 18, 2014. ITG specialists from the Albuquerque and Cheyenne IRS offices discussed the importance of performing an end of year reconciliation. Covered topics including learning employment tax end of year reporting due dates, why reconciliations are important, how to reconcile the Form 941 or Form 944 with Forms W-3 and W-2, how to identify mismatches between these forms and common mismatch examples were addressed.
Gaming Workshop Tucson, Arizona. Fourteen representatives attended the workshop held on September 25, 2014 at the Federal Building. ITG specialists from the Tucson IRS office covered different topics such as required tax reporting for gaming-related payments/activities, completing various IRS forms, tax deposit schedules and avoiding penalties and interest.
Mini-Advanced Employment Tax Workshop, Tucson, Arizona. ITG held a three-day workshop November 18 – 20, 2014 at the Federal Building. Nineteen representatives from various tribes and tribal entities attended. ITG specialists from the Tucson IRS office covered different topics such as defining employees vs. independent contractors, payroll taxes, making federal tax deposits, due dates and avoiding penalties.
Affordable Care Act (ACA) Presentation, Indian Health Service Area Office, Phoenix, Arizona. The ACA presentation, held on November 21, 2014, was included in the 2015 Training for U.S. Department of Health & Human Services Medicare & Medicaid Service staff from Indian Health Services and Tribal health clinics. Ninety representatives from various tribes and tribal entities attended the presentation. An ITG specialist from the Mesa IRS office covered ACA, taxes and health insurance with a focus on the American Indian community.
If you would like ITG to provide training in your area of the country, please contact your ITG specialist.
Arizona training opportunities
ITG will be offering the following workshop at the IRS office located at 300 West Congress Street, Conference Room B, Tucson, Ariz. 85701.
Indian Gaming Working Group Conference
April 22, 2015; 9 a.m. - 4:30 p.m.
- What is expected to be included in a Casino’s Risk Analysis
- Current developments and issues related to Suspicious Activity Reports - FBI Agent Dominick C. Margarella
- What to expect in a National Indian Gaming Commission (NIGC) audit - the NIGC
- Title 31, Class III net win, and Arizona Department of Gaming (ADOG) Audit Procedures - Mike McGee and Andrew Hawkes, ADOG.