Dear Friends,
The 1099 changes attached to the health care reform bill are another kettle of fish. These massively expand the requirements for filing the "1099-Misc" form, which companies use for recording payments to freelance workers and other individual service providers. Until now, payments to corporations have been exempt from 1099 rules, as have payments for the purchase of goods. Starting in 2012, that changes. All business payments or purchases that exceed $600 in a calendar year will need to be accompanied by a 1099 filing. That means obtaining the taxpayer ID number of the individual or corporation you're making the payment to -- even if it's a giant retailer like Staples or Best Buy -- at the time of the transaction, or else facing IRS penalties. In essence, the 1099-Misc is having its role changed from a form for tracking off-payroll employment to one that must accompany virtually any sizable business transaction. Just with business travel it would include hotels, rental cars, phone service: 1099, computer services 1099, postage meter: 1099 advertising, yellow Pages 1099, your landlord 1099. You might as well just keep them in your pocket and hand them out as you go around every day.
Tucked away in the health-care overhaul bill that became law this year was a provision that will require small-business owners to keep better records of what they buy. They'll also have to report some purchases to the government. This will apply to any trade or business.
This new law requires small businesses to issue 1099 forms to people or companies that sell them more than $600 worth of goods or services. It takes the 1099 beyond its most common business use, which is to report money paid to independent contractors or freelancers.
The law doesn't take effect until Jan. 1, 2012, which means owners won't have to worry about the paperwork until early 2013, when they're compiling their 2012 returns. But owners whose books and finances are chaotic might want to get themselves organized in the meantime so keeping track of such payments and reporting them become routine.
Buried and not well disclosed in the “2010 Health Care Reconciliation Act” is a very new requirement that will cost each business owner a significant amount of time. It will also drive the IRS a little crazy because even if everyone complies they will not know what to do with the information. The new law: The law in Code section 6041(a) called a revenue provision will require a business is required to file a 1099 form for all payments aggregating $600 or more in a calendar year to a single payee.
This will require you to secure the name of each vendor, their address and their federal identification number and to issue a form 1099 to them regardless of whether you purchase labor, goods or services, rents, interest, royalties or other profits. This will be very cumbersome and burdensome to comply with and may yet be delayed.
We will have to comply with this law starting January 01, 2012. So for 2012 we will need to issue these form 1099’s.
There will be financial penalties for failure to comply assessed by the IRS. The law is hopes to stop businesses, in this case vendors, from evading taxes on their income. Owners whose accounting system is a pile of receipts jammed into file folders are going to have a miserable time. On the other hand if you are maintaining your records in Quickbooks or some other good program and start securing this information now, you should have it a little easier.
We are going to contact each business owner we deal with in the hopes, we can assure the business owner has the Quickbooks preferences set up correct and their administrative person starts securing the information as time goes along. If you get the information and log it into your software before you cut the vendor their check, then I think you will be ready. There will be electronic ways of sending this information into the IRS. And this is preferable, as creating all those paper forms will be a pain. You can set up recipients in your software to flag them for the end of the year.
No time to go high-tech? Some owners who have resisted using software to keep their books say they don't have time to enter into the PC all their information on sales, invoices, expenses and bank accounts. That's a reality for an owner trying to focus on the core aspects of the business, including working with customers. We find that many owners who don't use software can lose money at tax time because it's hard to keep track of all of their tax information, especially their expenses. You risk losing some of your deductions unless you're very good at keeping paper files. There may be people who resist this law by keeping their books themselves, or not setting up for this change. While the IRS may be lenient for a while before they figure out how to handle this coming deluge of information, they have not had a history of much mercy.
Courtesy Jay West Accounting
The 1099 changes attached to the health care reform bill are another kettle of fish. These massively expand the requirements for filing the "1099-Misc" form, which companies use for recording payments to freelance workers and other individual service providers. Until now, payments to corporations have been exempt from 1099 rules, as have payments for the purchase of goods. Starting in 2012, that changes. All business payments or purchases that exceed $600 in a calendar year will need to be accompanied by a 1099 filing. That means obtaining the taxpayer ID number of the individual or corporation you're making the payment to -- even if it's a giant retailer like Staples or Best Buy -- at the time of the transaction, or else facing IRS penalties. In essence, the 1099-Misc is having its role changed from a form for tracking off-payroll employment to one that must accompany virtually any sizable business transaction. Just with business travel it would include hotels, rental cars, phone service: 1099, computer services 1099, postage meter: 1099 advertising, yellow Pages 1099, your landlord 1099. You might as well just keep them in your pocket and hand them out as you go around every day.
Tucked away in the health-care overhaul bill that became law this year was a provision that will require small-business owners to keep better records of what they buy. They'll also have to report some purchases to the government. This will apply to any trade or business.
This new law requires small businesses to issue 1099 forms to people or companies that sell them more than $600 worth of goods or services. It takes the 1099 beyond its most common business use, which is to report money paid to independent contractors or freelancers.
The law doesn't take effect until Jan. 1, 2012, which means owners won't have to worry about the paperwork until early 2013, when they're compiling their 2012 returns. But owners whose books and finances are chaotic might want to get themselves organized in the meantime so keeping track of such payments and reporting them become routine.
Buried and not well disclosed in the “2010 Health Care Reconciliation Act” is a very new requirement that will cost each business owner a significant amount of time. It will also drive the IRS a little crazy because even if everyone complies they will not know what to do with the information. The new law: The law in Code section 6041(a) called a revenue provision will require a business is required to file a 1099 form for all payments aggregating $600 or more in a calendar year to a single payee.
This will require you to secure the name of each vendor, their address and their federal identification number and to issue a form 1099 to them regardless of whether you purchase labor, goods or services, rents, interest, royalties or other profits. This will be very cumbersome and burdensome to comply with and may yet be delayed.
We will have to comply with this law starting January 01, 2012. So for 2012 we will need to issue these form 1099’s.
There will be financial penalties for failure to comply assessed by the IRS. The law is hopes to stop businesses, in this case vendors, from evading taxes on their income. Owners whose accounting system is a pile of receipts jammed into file folders are going to have a miserable time. On the other hand if you are maintaining your records in Quickbooks or some other good program and start securing this information now, you should have it a little easier.
We are going to contact each business owner we deal with in the hopes, we can assure the business owner has the Quickbooks preferences set up correct and their administrative person starts securing the information as time goes along. If you get the information and log it into your software before you cut the vendor their check, then I think you will be ready. There will be electronic ways of sending this information into the IRS. And this is preferable, as creating all those paper forms will be a pain. You can set up recipients in your software to flag them for the end of the year.
No time to go high-tech? Some owners who have resisted using software to keep their books say they don't have time to enter into the PC all their information on sales, invoices, expenses and bank accounts. That's a reality for an owner trying to focus on the core aspects of the business, including working with customers. We find that many owners who don't use software can lose money at tax time because it's hard to keep track of all of their tax information, especially their expenses. You risk losing some of your deductions unless you're very good at keeping paper files. There may be people who resist this law by keeping their books themselves, or not setting up for this change. While the IRS may be lenient for a while before they figure out how to handle this coming deluge of information, they have not had a history of much mercy.
Courtesy Jay West Accounting
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