Author Archives: Smita S

When Is My 1099 Due, And What Can I Do If I’m Not Ready?

1099′s are becoming more and more popular with businesses and individuals as the employment norms continue to shift, but some things must be kept in mind – and now is just the time to be keeping them in mind!

1099s are the easiest way to keep track of how much you paid individuals or small businesses and are essential if you plan on claiming the money spent as an expense.

Typically, 1099 forms have to be filed in the final week of February – that is if the filing is by paper. If filing electronically the deadline is typically 30 days later. In 213, the deadlines are February 28 if filing by paper and April 1 2013 if filing electronically.

If you are not quite ready yet (there can be a lot of reasons small businesses get behind on their paperwork) the government has actually streamlined the procedure. You just need to file a Form 8809, electronically or by paper, before the due date on the 1099 would have been. This will give you a 30 day extension. There is another 30 day extension available for hardship causes, but it is not easy to get.

The first one is automatically granted as long as the Form 8809 is filled out and mailed before the due date on the 1099s.

You must also be careful of how you send them – other than the post office, the only recognized carriers are the big three.

DHL Express (Same Day Service option only), FedEx (multiple services available) and UPS (also multiple services available). No other carrier can be used to send the forms in.

Also, if you have over 250 forms you must file the forms electronically.

The penalties for late filing can add up rather quickly, starting at $30/form and increasing to $100/form for all forms filed after August 1, 2013 or not filed at all.

There is also an intermediate step, $60/form, which is used if the form is more than thirty days late but is filed prior to August 1 2013. The important thing to remember is that it is not too late to file an extension or the forms, especially if you are filing them electronically. In fact, it is almost worth it to file electronically because of the automatic extension built into the system.

1099 forms are the payment method of choice for contractors, and any other business that you do more than $600 with. The 1099-MISC is the 1099 most widely used and when someone says 1099 that is the one that they mean by default.

There are other 1099 designations but they are for very specialized circumstances which do not normally occur.

It is very important to keep close track of your 1099 usage, and it is best to have multiple backups. The IRS does make exceptions for circumstances beyond your control, but it is always better to have this information in at least 2 places.

Now you have a good idea of the basic schedule that 1099 forms work on – there is still time to file, and if you are not ready yet you can file an extension online. We can help you with every aspect of 1099 filing and preparation!

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What Do I Do With This 1099 MISC and Do I Need to Report It?

Many people who may have performed work or services for others may be a little surprised to find a Form 1099-MISC in their mailbox at the beginning of the year. The Form 1099-MISC is used by businesses of all sizes to report money that they paid out to non-employees. Non-employees are usually independent contractors. If you get a Form 1099-MISC, hold on to it because you will need it in order to properly file your federal (and most likely) state taxes.

You should get a Form 1099-MISC from any person or business that paid you $600 or more during the tax year as long as you were not an employee of that company or person. The earnings that they report on the Form 1099-MISC will also be reported to the IRS, so you have to add this amount to your gross income when doing your taxes. Gross income is any income regardless of the source and includes commissions and fees that you have charged someone.

The first thing to do is to check to make sure that information is correct, especially your Social Security Number or Tax Identification Number. People make mistakes, so double check this. Next, make sure that the amount reported in Box 7 is accurate. This is the amount paid to you for work or services you did for the payer. Check Boxes 4 and 11 to see if any taxes were withheld. Withholding is not typical for 1099-MISC as this form is to be used to “non-employees”.

If you worked on a fishing boat and received shares, check the amount in Box 5.

If you provided medical or health care services, check Box 6 to find out how much was paid for your services.

Box 9 is checked if $5000 or more in goods intended for resale were received by you with the intent to resell those goods in something other than a retail establishment. This usually applies to those who sell goods on a buy-sell, commission, or deposit-commission basis.

Box 10 will tell you how much crop insurance you were paid, if any.

Box 13 will tell you how much in legal services you were paid.

Form 1099-MISC is also used to report rents, royalties and certain other income.

Box 1 should contain the correct amount that was paid to you for rent of land, office space, equipment, or machinery.

Box 2 should contain the amount that you received from royalties that were $10 or more.

Box 3 is for “Other Income.” This can be anything from cash prizes to legal awards for punitive damages.

Any payments listed in Box 1 probably will require that you use Schedule E in order to report your rental income.

For those payments that are in Boxes 5, 6, 7 and 13, consider them self-employment income. Generally, you will need to fill out Schedule C or C-EZ as well as Schedule SE.

The IRS will get a copy of your 1099-MISC and will check it against your tax return to make sure that you are reporting all of your gross incomes. Do not try to stiff them because you could face some hefty fines.

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What are the Current IRS 1099 Requirements for Small Businesses?

The requirements for Form 1099-MISC can seem confusing at times. The good news is any tax professional can clear up questions, and there is a wealth of information online as well concerning who must send out the forms and who are to get them. Here is some general information on the Form 1099-MISC requirements.

All businesses are required by law to issue Form 1099-MISC to those who have performed work or services for them who were not classified as employees. This can include professionals, independent contractors, and other types of individuals and business entities. The Form 1099-MISC is used by the IRS so it can matches the reported income to the person getting it to see that that person is properly reported that money as income. Businesses that do not send out Form 1099-MISC when they are required to do so can face stiff penalties for noncompliance.

Generally speaking, the Form 1099-MISC is to sent out no later than January 31 to the payee, and copies must also be sent to the IRS prior to the last day of February. Some states require that they, too, get copies before certain deadlines. Also, those sending out Form 1099-MISC must file Form 1096. This is a summary of 1099-MISC forms that were sent out.

A Form 1099-MISC must be given to anyone who falls into one of the following:

When non-employees (such as independent contractors) are paid $600 or more.

When there are payments that exceed $10 for royalties, substitute dividends, or and tax-exempt interest.

When payments are made to attorneys or the crew members of fishing boats regardless of the amount paid.

Any payments to persons who are subject to the backup withholding rules regardless of the amount paid.

If there is a sale of $5,000 or more and the sale was for consumer products that are for resale anywhere other than what is considered a permanent retail establishment.

Many times it may be confusing to understand the difference between an employee and an independent contractor. Generally, the IRS says a person is an independent contractor if that person is only subject to the control or direction of another for the sole purposes of detailing or outlining the work that is to be accomplished, BUT is not subject as to methods or to the means by which that intended work is accomplished.

Here is a simple example: A company hires a landscaper to mow the grass. The company can tell the person where the grass is and how often they want it mown, and agree on a price. The landscaper provides his or her own tools, transportation, sets his or her own hours, and is not required to be “on the clock”…this would be an independent contractor.

On the other hand: a company hires a person to do maintenance and this includes mowing the grass. The person is required to clock in and out, is required to be at work at a certain time, is subject to the rules of the company, and is provided the tools needed to get the job done. This person is an employee.

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What are the Penalties Imposed by IRS for Failure to File 1099 Forms?

In general, there are two types of penalties associated with 1099-MISC forms. The first concerns those who are required to issue the forms; the second concerns those who receive the forms. Let’s take a look at both.

For those who are required to send out 1099-MISC forms, there are penalties for not issuing Form 1099-MISC. It does not matter if you are a company or a person, if you are required to give someone who worked for you a Form 1099-MISC, you must do to. Generally, you have to give it to the person by the end of February of the year that follows the tax year that the income was paid.

In the event the Form 1099-MISC is not sent out on time, the company may be fined a penalty that can range from $30 to $100 (for each form), with a penalty maximum of $500,000 per year. This will depend on just how overdue the company has missed the deadline in issuing the form. Keep in mind, that if someone intentionally ignores the legal requirement to provide a timely and correct Form 1099-MISC statement, that company may be subject to a $250 minimum penalty per statement, and there is no maximum limit associated with in this case.

Some taxpayers wonder if they should be getting a Form 1099-MISC. The most common reason for someone to send you a Form 1099-MISC is that you did work for that person or company as an independent contractor. Do not confuse this with normal earned wages or salaries which you may have received from a job in which taxes were withheld from you by the employer.

The pay that is reported on your 1099-MISC is normally subject to both federal income tax and as well as state income tax. It is the responsibility of the one who paid you those monies to send you a copies of your Form 1099-MISC. You must then report these earnings on your tax returns.

What Income Can Go On Form 1099-MISC?

The answer is there are many types of income which can be reported using the 1099-MISC. This might include rents, non-employee compensation, most types of royalties and charter bus or even fishing boat proceeds. However, most often, the reason for getting a Form 1099-MISC for someone is that you worked as an independent contractor at some point during the year. An independent contractor is NOT considered an employee and therefore the company or person you worked for is not responsible for withholding taxes on you.

If you do not include the 1099-MISC income on your tax return, you may be penalized. In some cases, such as you underpay your tax, the IRS can charge you as much as 20 percent of the underpayment. For instance, if you underpaid (because you ignored your Form 1099-MISC, by, say, $500, the penalty could be $100 (which is $500 x .20 = $100). You can avoid these problems by making sure you include all of your miscellaneous income. If you are not sure about any of this, contact a professional for advice.

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Article Title 1 What is the Deadline to file 1099s and What Happens If I Miss It?

Millions of Americans will receive one or more 1099-MISC forms this year. In order for taxpayers to file their taxes on time, they need to have these forms delivered to them by a certain deadline which is established by the IRS. Failure to provide the forms to those who are entitled to them can bring about serious consequences. Here are the deadlines for submitting 1099s for 2012.

1099-MISC Deadline:

You must send Copy B as well as Copy 2 of the 1099-MISC to the person or company no later than January 31, 2013. However, payments reported in box 8 or 14, the due date is extended to February 15, 2013. In addition, you must also send Copy A to the IRS. This must be done by February 28, 2013.

For those who file electronically, the deadline is April 1, 2013. It is important to understand that to file electronically it is required that you have software that is able to generate a file that is in accordance with the specifications outlined in Pub. 1220. For those that are required to file electronically (and fail to do so) there can be a $50 penalty for each return that was not filed. There are, however, waivers which can be applied for, but you just show reasonable cause.

1099 Deadline Penalty:

Those who do not file within the deadlines (and do not have a good reason) may be subject to penalties. Persons may face penalties if they: fail to file timely; if they fail to list all the required information on the 1099; if they include information that is not correct on the return. You should double check all of this information.

There can also be penalties for those who file on paper if there are required to file electronically; if they report a Tax Identification Number that is not correct, or if they fail to report a TIN altogether. For those facing a penalty, the 1099 deadline penalty is based on when the corrected version is filed. Generally, the penalty is:

An amount of $15 per return if the corrected form is filed within 30 days or by 30 March if the deadline date is February 28. There is a maximum penalty of $75,000 per year for large businesses and $25,000 for small businesses.

A penalty of $30 for each return if the corrected form is filed more than 30 days after it is due but before August 1. The maximum penalty is $150,000 per year; $50,000 for small businesses.

An amount of $50 per return for those who file after 1 August, or do not file required forms at all. The maximum penalty is $250,000 per year; $100,000 for small businesses.

As you can see, failing to file your 1099s on time can lead to expensive fines. If you are required to send out these forms to those that may have worked for you during 2012 make getting forms completed and send out a priority. It can save you a lot of money and stress.

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I’M NOT SURE IF I SHOULD USE A 1099 – HOW DO I KNOW FOR SURE?

The 1099 form covers many different types of payments made to individuals or companies, and there are different requirements and different forms that will cover them. There is a long list of these, such as the 1099-PATR, which is used for ‘Taxable Distributions Received from Cooperatives’.

For the vast majority of individuals and businesses, though, the 1099 requirements are quite simple (compared to many IRS rules). If you pay more than $600 for legal services or other professional services, or for any subcontractor you must issue a 1099 for that person or business.

You also must issue a 1099 for any rents paid for real estate. This applies to any real estate rented, no matter what the purpose is.

The $600 is cumulative as well. If you pay John Sloan Network Specialist 4 smaller amounts of $235 per service, he will still need to receive a 1099 because he received a total of $940. Anything above $600 that you are paying to any independent contractor or for any services must be reported, no matter how the money is broken up.

1099 requirements also include gaming prizes, royalties from the sale of physical or intellectual property.

Most of the other types of 1099 forms are used by specific industries or institutions. This includes sub forms like the 1099-INT, which designates interest received from investments like treasury bonds, stocks, notes and more. Depending on your investment structure they would be the ones handling this form.

The 1099-MIC is the most used form and as a business or an individual that is most likely the one you will see. For a business, there are some exceptions to the $600 rule. They include payments to corporations except under very specific conditions.

Wages paid to regular employees are already covered by W-2 forms.

Business travel allowances and per diem expenses do not fall under 1099 reportable payments.

You do not have to track money spent on merchandise, freighting, storage or telephony. And, if you rent from a real estate agent you do not have to report that via 1099; it is their job to issue the 1099 to the landowner.

The 1099 form is used for trade or business reporting only. Personal payments are not reportable. According to the IRS, you are engaged in a trade or business when you operate for profit or gain.

Payments made for life insurance protection or to a tax exempt organization (such as an IRA), and ‘payments made to or for homeowners from the FHA Hardest Hit Fund . . . or other similar state program’ (from the IRS, instructions on 1099).

One more requirement which will only apply to a small number of businesses that are engaged in wholesale as well as retail operations. If you sell over $5000 of consumer products (let’s say leather knife sheaths) to a buyer so he can resell the goods and he does not have a permanent retail establishment you must report the sales via a 1099 form.

This type of client may be on a mobile circuit, such as a fair or some other type of traveling business like Renaissance Fairs. It applies to anyone who buys wholesale from you who does not have a permanent brick and mortar operation.

The golden rule is the $600 rule. If you paid a contractor or other service, you will need to issue a 1099. If you do not you will not be able to deduct that person’s work on your taxes.

If you are a contractor, keep track of how much people pay you. If you did over $600 for any company, it is more than likely that they will be sending their form 1099 in, even if for some reason you don’t get it.

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I GOT MY 1099-MISC – WHAT COMES NEXT?

So, we have covered the aspects of using 1099 forms for business. The most widely used of the 1099 form is the 1099-MISC, and this is what people usually mean when they say ’1099′. If you are doing nearly any type of work or service for any type of business, whether it is a single person operation or a corporation with thousands of employees, the 1099-MISC is the form that they will use to keep track of your earnings on their end. They can then deduct those as expenses.

If you have gotten a 1099-MISC from a business that you did any type of work or service for (and were not on their actual payroll), then the government has also received notice, and they will cross check 1099 forms which companies file against the individuals they show payment to.

Any time you do more than $600 in the course of the calendar year they must issue a 1099 form, and in all but a few specific cases it will be a 1099-MISC. Even if you don’t receive a 1099-MISC, if you have make $400 setting up a business’ computer system you do have to report that income. The reporting just isn’t automatic, as it is when the $600 limit is reached as with a 1099.

It is a bit of extra work for the tax payer, but the forms are fairly easy, especially if you are using some sort of software package to help with your taxes. If you are using a professional service, either online or one in your area they will take care of the forms for you. But, never forget you are on the hook if your taxpayer messes up (despite what they say).

At the least you should know what forms have to be filed, even if you are not going to fill them out yourself.

With 1099-MISC income, you will need to file a Schedule C or Schedule C-EZ (if you are filing 1040EZ). It is also on this form that you will list your deductible business expenses. It is extremely important that you document all business expenses with receipts and notations in some sort of book (or computerized records).

These deductions are separate from the deduction you get on your personal taxes, and they will come off the top of the gross income. Remember, though, if you do not have a provable paper trail of payments and receipts you will not be able to use those expenses to adjust your income properly into profit and operating expenses that will not count towards income,

The other form you will file is a Schedule SE. It is possible, especially if you started a consulting firm late in 2012 that your expenses are more than the money you have earned thus far. The Schedule SE simply shows the amount of profit you made from the business or venture after expenses, and shows how much tax you will owe on that money. If you do not show a net profit you will still use the Schedule SE but you will not owe any business taxes. You only pay taxes on net profits (that is, what is left over after all expenses have been paid).

All of these forms are fairly easy to fill out on your own if you are good with a calculator. Even if you are using a computer program or a tax professional, though, it is good to know how they are getting the number at the end of the last page. Now you should have a clear understanding of how the 1099-MISC form works, and what to do with it!

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1099′s Have Come Due Again: Here’s What You Need To Know.

The Time Of Year For 1099′s Have Come Around Again, And For Businesses And Individuals There Are Questions About Exactly How The 1099 Works.

The 1099 is the way the government is tracking income; the rules changed for 2012, and now any company that pays you more than $600 for your services must issue you a 1099. These services can include nearly anything – independent consultant or contractor, writing services, legal services or more.

In almost all instances if you are earning money from a business or company the 1099-MISC will be the 1099 form that you receive. There are others, but they are for specific instances usually dealing with financial institutions of one sort or another.

When you receive the 1099-MISC, check the basic information to make sure that everything is correct – your name, your social security number or the TIN (Tax Identification Number) of your business, your address and most of all the total amount of payments.

If you know that you have done over $600 worth of business for a company, do not file your taxes until you receive the 1099. Even if you count the income from it when you file, the federal government will not know that. This can lead to double counting income, something which you must be careful of when using the 1099-MISC as well.

Make sure you check your recorded income from each entity against the 1099 they sent you to make sure the two numbers match and that you are not double counting any income.

Once you have verified the information and amounts contained in the 1099-MISC, there will be a few more forms that go along with your taxes. These will be a Schedule C or C-EZ, and a Schedule SE. These will be filed with your 1040 forms.

Do not forget, you must still report all income even if you do not receive a 1099-MISC. The Schedule C is used to report gross receipts (including income not reported on 1099-MISC because it was less than $600). The schedule C is also used to report deductible expenses. If you have filed a 1099 for someone to whom you have paid more than $600 to, that 1099 would go in this area.

Any deductible expenses are entered on the Schedule C (or C-EZ). These could include equipment and supply purchases, mileage, office expenses, advertising and more.

The final form is the Schedule SE. This will show the net profit from your business, if you had a profit. Many small businesses lose money the first year because of advance equipment purchases. If you did have a net profit, though, the Schedule SE will be used to calculate the amount of self-employment tax that you owe on your 1099/business income.

Online File Taxes can help you with every aspect of your income taxes, including 1099-MISC or any other sort of 1099 you may have received. We will make sure your income is not double reported, and that you are claiming all the business deductions on your Schedule C that you deserve.

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1099 PENALTIES – WHAT YOU NEED TO KNOW AS A BUSINESS WHO IS NOW USING 1099-MISC FORMS

In this part of our series, OnlineFileTaxes will look at what happens if you don’t file the 1099′s on time.

The first thing to remember is the date for filing – if you are a business that has generated 1099′s, you must file them by February 28th 2012 or April 1st, 2013 depending on whether you are filing on paper or electronically. If filling by paper you would use the first date, February 28, 2012.

If you are a larger company and have generated over 250 1099 forms, you must file them electronically – the federal government does not give you any choice about that.

The good news is, it is very easy to get an extension to filing the forms, and you don’t need a reason to be late. Also, since you are reporting money that was paid out you do not have to send any money if you are getting an extension, unlike filing an extension on your tax filings.

Remember, the extension must be filed on or before the date that the 1099 forms are due. Penalties begin at $30/form if filed late and can rise to as much as $100/form, depending on exactly when they are filed. Depending on how many forms you have to file, this could easily get quite expensive.

The penalties are arranged so that the amounts go up per form depending on how late you are filing. To file an extension use form 8809, whether on paper or electronically. This will extend the deadline by 30 days, and another extension may be filed under certain conditions.

From the first 30 days of the due date (or the date the extension runs out) the penalty is $30.00/form. The next step is $60.00. This is for forms which are filed more than 30 days after the due date but before August 1st, 2013.

After August 1, 2013 the penalty increases to $100.00/form which is late. This penalty is also the same for not filing them at all. The maximum penalty that can be levied against small businesses is $500,000. Keep in mind, a small business by government definition is any business which has less than $5 million in business (average gross receipts) for the three years previous.

For a person with one or two 1099 forms, the penalties are not very egregious but it is easy to see how quickly they can mount up if you are a larger company that routinely pays workers and contractors using a 1099 form.

For individuals, the form is just a way of keeping track of income, so the penalties would come in on the general tax return. For instance, if you don’t report a 1099 to try to report less income the problem won’t be that you failed to report the 1099, it will be that you failed to report income. This is much worse than the business which simply forgets to mail the forms out in time.

If you are a business and the worst has happened, such as fire, flood, computer meltdown or if some other misadventure occurs the IRS is quite good at working with the company.

The important thing to remember is to talk to the IRS about any situation in which the forms are going to be late or if the record of them have been destroyed.

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I USED 1099 FORMS IN MY BUSINESS THIS YEAR – WHEN DO I NEED TO SEND THEM

Using the 1099 form is an increasingly regular practice among businesses of every type. Since the depression in 2008, 1099 use has increased across the country, with some markets seeing even more growth than usual. Over the past decade, people who primarily get paid by 1099s increased by 51% in Texas.

Much of that growth has occurred since the depression as companies don’t want to expand their payroll, but they need workers in critical areas, especially hi-tech and other areas of expertise.

As a result, there are more people using 1099 forms now that ever have before and more businesses that are paying those people. Many of these are small businesses, and are unfamiliar with the 1099 when it comes to tax filing issues. OnlineFileTaxes will be tackling issues dealing with the 1099 and the best way to make sure you follow the rules in this post and several following it.

The following is general information – for your specific taxes and tax situation, see a qualified tax preparer or accountant.

In this post we are going to be dealing with 1099 forms and when you need to file them. Once you have all your 1099 forms compiled, you will need to file them by February 28, 2013 if you are filing by paper. If filing electronically, they will need to be filed by April 1, 2013.

When sending copies to the people you have paid, January 31 is usually the date which you have to send their copies. This gives those people time to take care of their taxes.

Just like normal taxes, as long as it is addressed and mailed before the end of business on the last day it is considered filed on time. These dates do change from year to year, but fall regularly for paper filing in the last week of February and electronically typically a month after that date.

You will also need to send the recipients their 1099 form; this may be done by private company as well as the US Postal Service. Right now authorized delivery companies are DHL Express, Federal Express and UPS, but to fit within the guidelines you generally have to use next day or 2nd day air.

Depending on how large your company is and how many times they have used 1099′s you may have to file electronically. If over 250 1099 forms re to be filed by any company, they must file those forms electronically.

Filing for an extension on the 1099 deadline is quite easy and there is no explanation needed, just file the extension by the due date when the 1099 was going to have to be filed. The proper form for getting an extension is Form 8809, and this may be filed either electronically or on paper.

For individuals, the 1099 form has to be filed along with their general income tax. This will usually be done on a schedule C along with your 1040 form. Remember, even if you did not get a 1099 from a company that has employed you to perform work for them they have more than likely filed one with the government.

If you made income, you must report it. If the company which paid you reported this income by sending the 1099 to the IRS as they are required to do, that will be cross-referenced when your return is received. If you did not report the same amount of income, you can be charged with filing a false tax return.

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