1099

1099-MISC Best Practices

Do you get surprised at end of year when all the sudden your bookkeeper starts asking you about W9s and subcontractors and verifying addresses and amounts? Or -- even worse -- do you have no idea what I'm talking about?

This may be a nasty shock, but bear with me: you are required to file a 1099-MISC Form to any person or entity that you pay more than $10 in royalties or more than $600 in rent, service, prizes, income, etc. (See the whole, ten part list here, on page 1 under Specific Instructions.) If you think for a second about every one you pay more than $600 in this calendar year, the list can get pretty long. But there are some big exceptions that will ease the burden. The following do NOT get 1099-MISC forms from your business.

  • Employees
  • Corporations that are treated as C or S corporations
  • Payments for merchandise
  • Attorneys
  • See the rest of the list here, on page 1 and 2 under Exemptions.

But wait, there's more (or, rather, less). Here's a quote from Intuit:

Beginning with tax year 2011, the IRS requires you to exclude from Form 1099-MISC any payments you made to a 1099 vendor by credit card, debit card, gift card, or a third-party payment network such as PayPal.

So, who are the likely candidates for 1099s? In our experience with small businesses, subcontractors and labor (other than employees) whom were paid by check are the biggest source of 1099 creation. If you pay anyone, who is not a corporation, for services via check or electronic transfer more than $600 in one year, then you need to generate and send them a 1099-MISC right when the new year rolls around. This will especially include people whom you paid to remodel, repair, or maintain anything for your business or office. Anyone whom you commissioned for goods for your internal use (not for sale) or work and who is not on payroll will require a 1099-MISC.

We've been around the block before and we've filed a whole lotta 1099s. We're writing this to you in the summer on purpose. Here are our best practices for a midyear check on your 1099-MISC process.

1. Midyear 1099 Summary

In the summer, run (or have your bookkeeper run) a 1099 Summary for the year so far. Review this report for a few things:

  1. Are any of these vendors corporations? If so, cross 'em off.
  2. Are all of your subcontractors, outside services, and nonpayroll laborers on this list? If not, go find them!
  3. For the vendors on this list, do all of the amounts look correct? Are there missing payments?
  4. Are there any vendors that you know should be 1099 eligible that are missing from this list? If so, track down their info.

2. W9 Check

For every one on that 1099 Summary, do you have the W9 information? (Name, address, SSN/TIN.) If not, have them fill out this form so you can generate them a 1099-MISC at the end of the year.

3. W9 Practice

Make it a habit to get W9s filled out prior to paying anyone money for services, rent, etc., have them fill out a W9 form. This will help you avoid that end-of-year scramble for information, which is especially difficult when you're trying to get a hold of a vendor whom you paid back in January and it's eleven or twelve months later! Those people are hard to get a hold of, trust me. Get their W9 filled out now and save yourself a massive hassle.

4. Select your Processing Method

Choose how you will file your 1099s. If you have a bookkeeper, they will probably have a system for this and you just need to verify that they have 1099s on their radar. If you are filing yourself, you may want to fill out the 1099s by hand come end of year or use a software to electronically file, like TurboTax or Intuit.

All the information about 1099-MISC forms is available at the IRS website. If you have any further questions, check out the publications here.

 


Don't have a bookkeeping system?

Give us a call, check out our services page, or set up an appointment with Jackie, our official manager of onboarding!

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Sales Tax Tips for QBO Users

We’ve talked previously about using the Texas Comptroller’s website to file your sales tax, which you can find here, but where do those numbers come from? How do you keep track of taxable sales? Where do you find your total sales for the quarter or the month?

For QuickBooks Online users, don’t miss this video, which will answer these questions by walking you through where to find the important numbers that enable you to file your sales tax.

Still have questions about your sales tax? Call in and schedule an appointment with a professional.

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Paying Sales Tax Online

There are a lot of taxes out there. If you don’t pay the right taxes, by the right deadline, you’ll pay fees in addition to the taxes. No one wants to pay more.  Sales tax is one tax that seems to consistently sneak up on people. Everyone knows income tax is due April 15th–that one’s easy! But how about sales tax? Do you pay quarterly, weekly, annually, or other? Is there an easier way?


Let’s make paying sales tax a little easier by paying online! Here is a video from the TX Comptroller to walk you through the steps of filing your sales tax.

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How do I get a mileage deduction?

Mileage deductions can be difficult to understand when you’re recording your business expenses, but we can make it simple for you.

Actual Vs. Standard Mileage

In order to take any kind of deduction, the taxpayer is required to keep a written log of all miles driven and record how many were driven for business use and how many were driven for personal use. There are two options: actual auto expenses or the standard mileage deduction.

Since the standard mileage deduction is based on an average, in a large percentage of cases, using the mileage deduction produces a larger auto expense deduction than actual expenses. In order to use standard mileage, it must be used the first year the vehicle is placed in service.  After the first year, taxpayers can decide to use whichever method (actual or standard mileage) that has the highest amount of expense.

(Note: If the vehicle is leased, you must choose either standard or actual for the entire life of the lease.)

To get the actual auto expense deduction, the taxpayer must keep track of all maintenance, repairs, fuel, tires, insurance, registration fees, licenses, etc. and determine how much of that is attributable to the portion of the total miles driven that are business miles.

IRS 2014 Mileage Rates:

  • 56 cents per mile for business miles driven
  • 23.5 cents per mile driven for medical or moving purposes
  • 14 cents per mile driven in service of charitable organizations

IRS 2015 Mileage Rates:

  • 57.6 cents per mile for business miles driven
  • 23 cents per mile driven for medical or moving purposes
  • 14 cents per mile driven in service of charitable organizations

To take advantage of this deduction; a taxpayer must keep track of:

  • All business miles driven for the year (in written form)
  • Total miles driven for the year (in written form)

When can you NOT use the standard mileage rate?

  • For commuting miles, which are the miles going from home to work and vice versa
  • If your car is for hire, for instance a taxi cab
  • If you use five or more cars at the same time for business, for instance a fleet operation
  • If you have already counted the depreciation of the vehicle as a deduction or allowance

Note: Parking fees and tolls for the business are separately deductible, regardless of which deduction method is used.