1099 Forms Are Due Soon

It's a new fiscal year, which means it's time to start filling out and filing your 2012 1099 forms if you want a stress-free tax season.

As you probably know, small business owners file self-employment taxes every fiscal year.  Among the requirements: You have to file a 1099 form for any taxable income that doesn't show up on a W-2 form.

You can spend hours reading through the IRS' website about all the changes and updates. To help you out, here are three tips that every small business owner should know:

·         Make sure you send and receive the correct 1099 forms. There are many different types of 1099 forms, which the IRS refers to as "information returns." Most must be mailed to recipients this month, and then reported to the IRS in February. For employers who deal with independent contractors, Form 1099-MISC should be on your to-do list right now; you may also soon be receiving a Form 1099-K from each third-party payment processing service that you used in 2012.

·         1099-MISC forms should go out now. Business owners have until Jan. 31 to send out 1099-MISC forms to any individual who was paid $600 or more for services in the past year. This doesn't apply to corporations or LLCs that were paid for services, but it does apply to contract employees and individual contractors. You then have until the end of February to file the forms with the IRS. But make sure you give the payee time to review the 1099-MISC and correct any mistakes.

·         Pay attention to the 1099-K. This month, most businesses should receive a 1099-K from every payment processor you worked with during the year. This includes banks, credit card companies, and services like PayPal. The 1099-K was introduced last year, and it's only for businesses that sell more than $20,000 in goods or services through at least 200 transactions in a calendar year. Business owners should use their 1099-K forms as a way to check their calculations when completing their tax returns

Form 1099-K Payment Card and Third Party Network Transactions

Starting in January 2013, businesses that accept credit and debit cards when making sales to customers will receive an IRS tax form 1099 K from their credit card processing company. The 1099-K will report the total payment transactions for the year 2012. The new reporting requirement is part of on-going government efforts to increase collection of income tax.

Not only must banks and credit card processing companies comply with the new reporting requirement, third-party networks such as PayPal and eBay, Inc. must also report total credit card transactions to their business customers who use their services to process online sales. Compliance may prove to be a major adjustment for these entities. PayPal, a subsidiary of eBay, Inc., generated more than $31 billion in total net payments in 2009, according to eBay’s annual report for that year.

Exemptions

Not every merchant will receive a form 1099-K; only those who generated both a minimum of 200 transactions and $20,000 or more in sales. Casual sellers should keep in mind that even though they may not receive a 1099-K, their sales income is subject to income tax and must be reported on their tax return. Knowing whether your online garage sale qualifies as a business in the eyes of the IRS can be tricky. But if an online garage sale turns into a business with recurring sales and purchases of items for resale it may be considered an online auction business and the complexities can be manifold.

2011 form 1099-K report credit transaction

Starting 2012, any income that is received through credit and debit card transactions will have to be reported to the IRS by filing form 1099-K (Merchant Card and Third-Party Network Payments).

Financial institutions and merchant card service providers will have to report the annual gross payments which have been processed either through debit or credit card using form 1099-K to IRS and to the merchants. The 1099-K form format is unlikely to be similar to the 1099misc form which is used to report miscellaneous incomes earned by non employees/independent contractors/freelancers.

As the new development has already taken off considering that January 2012 has begun, it would be advisable that payment processors and business owners get ready, prepare the information they need and file form 1099-K and send a copy to the IRS and the recipients as early as possible.
Details of Credit Card and Merchant Payment Reporting

Banks and other payment settlement services will need to report gross annual receipts for each merchant. The income reporting will apply to "any transaction in which a payment card is accepted as payment". Thus, banks and other financial service providers will be reporting the total, gross amount of credit card and debit card payments for the year for each merchant.
Exception for De Minimis Payments

Reporting 1099-K form is not required if

• A merchant's total payment transactions for the year does not exceed $20,000, and 
• The total number of transactions does not exceed 200. 
• A withdrawal of funds at an automated teller machine (ATM) via payment card, or a cash advance or loan against the cardholder's account 
• A check issued in connection with a payment card that is accepted by a merchant or other payee. 
• Any transaction in which a payment card is accepted as payment by a merchant or other payee who is related to the issuer of the payment card.
  

How to prepare for credit card and third party payment reporting (FORM 1099-K)

Small businesses will want to review their bookkeeping and accounting practices. Once card payment reporting begins, business owners will need to reconcile the information reports submitted by the banks to their own books. Any discrepancies in reporting will need to be addressed so that accurate tax returns can be filed with the IRS.

One bookkeeping issue is clear; the new law requires banks to report gross receipts. However, merchants often have chargeback, issue refunds, or have debit card transactions where the customer receives cash back. Under the proposed regulations, banks and other payment transaction services will be reporting only gross monthly and annual payments. Fees, chargeback, refunds and other items will not be netted against these gross amounts for IRS reporting purposes. Accordingly, businesses should have thorough accounting procedures to keep track of these items separately. In other words, if you are accustomed to recording only a net deposit from a merchant account, it would be advisable to separate those net amounts into gross receipts and the associated fees and refunds. That way your internal financial reports can be more easily reconciled to the new Form 1099-K. 

Form 1099-K requires merchants to provide their full information

Since financial institutions will need to report credit and debit card receipts to the IRS, merchants will need to provide their payment processor with the full legal name of the business, their address, and taxpayer identification number. For most businesses, this will be their Employer Identification Number (EIN). As such, payment processors will likely request businesses to provide them with a Form W-9 to obtain this information. 

Possible Backup Withholding Issues

Merchants who fail to provide their taxpayer identification number could become subject to backup withholding at a rate of 28% on their payments. To prevent backup withholding, merchants should provide their card payment services provider with the name, address, and EIN for the business.

Another concern is that credit card transactions could become subject to backup withholding if a business commits fraud on their tax payments. Under the proposed regulations, the IRS made it clear that backup withholding would occur on gross card payments. This could leave a business in severe financial difficulties. Business owners who are struggling with tax debts should work with their tax professional to develop a repayment strategy that prevents any withholding on their card payments.

What is a 1099 misc- Tax Form 1099, How to file a 1099?

The 1099 IRS federal tax form is used to report income to the government that does not come from wages, salaries or tips. Two papers will be made, one for the payer and one for the payee. The form 1099 is usually used by independent contractors who are non-employees.

If you own your own business and sub-contract yourself out to render services to a client of yours, then they may give you a 1099 tax form at the end of the year. Their accountant will send it to you with all of the accurate information about you and how much money you made during the year.


Income Other Than Wages Salaries and Tips
The 1099 tax form will have the name of their corporation, LLC or business name and it will also have your information on the 1099 form. The total amount of money you made from them will be the information the IRS will count as income made by you.
If you have paid a contractor at least $600.00 for the year, then you will give him or her a 1099 tax form. If you have received $600.00 or more from a client you rendered services to, then you should receive a 1099 form from the client. If they don't 1099 you, then you must still report the income on your federal tax return form.

Electronic Filing of IRS Federal Tax Form 1099
If you are the payer and you have 250 1099 forms or more, you must file the 1099 tax forms electronically. If you have less than 250 and you file in paper form or you may also chose electronic filing method, For more information on all of the 1099 tax forms, you may need to visit 1099online.com.

Payee, Freelancers, Sole Proprietorship, Self-Employed
If you are the payee, then you will use the information on the 1099 tax form to complete your own income tax return form. You will have to attach the 1099 tax form to your tax return. What you will probably do is file a 1040 with a Schedule C attached. This is the way most self employed (Sole Proprietorship) people file their federal income taxes.The 1099online is user friendly website where you may file the form 1099 very quickly and accurately.

IRS proposed regulations on form 1099 K

1099 K which IRS starting to track the merchant card and third party transactions for the calendar year 2011 which has to be reported early 2012 to IRS. IRS posted this article on the proposed regulations for merchant card and third party transactions.

The Internal Revenue Service proposed regulations under a new statute requiring that, starting with transactions in calendar year 2011, the gross amount of payment card and third-party network transactions be reported annually to participating merchants and the IRS.

The provision was enacted as part of the Housing Assistance Tax Act of 2008 and is designed to improve voluntary tax compliance by business taxpayers and help the IRS determine whether their tax returns are correct and complete.

“Time and time again, we have seen that better information reporting helps the tax system work better by ensuring that everyone pays what they owe,” said IRS Commissioner Doug Shulman. “The new law gives us an important new tool for closing the tax gap and also provides business taxpayers better documentation to compute and report their income and expenses. The IRS will work closely with stakeholder groups to ensure a smooth implementation of this new program.”

These proposed regulations, posted today on IRS.gov, propose rules to implement reporting of credit card, debit card and similar transactions, as well as transactions settled through third-party payment networks, such as third-party organizations that settle online transactions. The IRS also released for comment a draft version of new Form 1099 K, Merchant Card and Third-Party Payments, which will be used to make these reports.

The new law requires banks and other payment settlement entities to report payment card and third-party network transactions with their participating merchants. The IRS emphasized that individual cardholders are unaffected by this requirement, and none of the cardholder’s personal information will be shared with the IRS.

The IRS has created Form 1099-K, which is similar to the existing Forms 1099 used to report interest, dividends and other payments. The first information return covering calendar year 2011 must be filed with the IRS and furnished to participating merchants in early 2012.

1099online.com is IRS certified efile provider for all the 1099 forms, one of the first site to site for the IRS new form 1099 k.

Changes in 2011 form 1099 reporting

In 2012 all businesses will face an increased burden related to Form 1099 informational reporting requirements. In 2011, any recipient of rental income will be considered to be engaged in a trade or business and will be subject to Form 1099 reporting rules.


1099 Changes in 2011 reporting

The Small Business Jobs Act of 2010 included increased reporting requirements that will impact persons receiving rental income. Specifically, payments made after December 31, 2010 for rental property services totaling $600 or more to a single payee will need to be reported to that payee on a Form 1099 MISC. For example, if a rental property owner hires a ABC to fix the wash room sink in a rental property for $605 dollars, he will be required to issue ABC a Form 1099 MISC for 2011.

Furthermore, the penalties related to delinquent and omitted Form1099 filings have been increased.

However, there is one bright spot in the numerous changes discussed above.  The IRS issued regulations that exempt payments made after December 31, 2010 by debit or credit cards from Form 1099 reporting requirements since these payments will already be reported under Sec. 6050W by the payment processors. In summary, the impact of these changes will be significant as businesses may need to gather taxpayer information numbers from additional vendors/service providers, maintain more detailed records, and issue a greater number of Forms 1099.  It is worth noting that there have been proposals in Congress to reverse or reduce all or a portion of the additional reporting requirements.

Thus, one should continue to monitor the requirements for any changes.

1099-MISC forms due by January 31

Yes, but you do have some twist room up until February 28..................... Until March 31 if you e-file. 1099-MISC forms are supposed to be sent to recipients no later than January 31, but the true deadline is February 28. That is the deadline for mailing your 1099s to the IRS. You have until March 31 if you submit 1099s electronically.

Follow these steps to file 1099-MISC forms on paper by February 28. Time is of the essence.

First, Check out how the buying the form works

This may not be as simple as it sounds. 1099 forms cannot be downloaded from the Internet like most tax forms, because they are red, scannable jobbers. You can get right down to your local office supply store and buy them but those forms very difficult make the paper filing and also lot of paper work has to do. Those blanks will be quite expensive. This step will not possible to file the form 1099 misc.

Second, Use 1099 efile service providers

1099online.com is the best site where you find easy navigation to enter the information for preparing the form and efiling with IRS as well as email to payee. If payee doesn’t have the email very quick methods download the form from the website also find an attached document in the registered email after the submission.

There is no particular software that you need to install into your system, no downloading work, no paper work, no service problem. Well professional accountants support filing the information. The most important is while filing the form with 1099online.com is lowest filing fee in the industry and time saving process.

If you more question on this please do contact our support team to get more information.

what is form 1099 K- Instructions of 1099

In this year 2011 there will be a new tax form IRS is starting up that is form 1099 k. This form is there show up all the often transactions done by the small business which they don’t report their revenue to IRS now there is no hiding from IRS any more. What small companies do is they don’t often report all their transactions to IRS whenever they use their credit or debit cards revenues or revenues from the third party payments like ebay or paypal

Accept as true or not till now the IRS has been taking the word of the business owner that he is reporting all of his income because they did not have access to the credit card revenues of small companies. There was only one way to check if a company was cheating on its taxes was to do an audit. It is impossible for IRS to audit every year every small business owner about their transactions. It is not a very full proof system although most people don’t mind that.

Now with this new form 1099 k the gross amount of credit card, debit card, and third party transactions will have to be reported out correctly. We believe that this new form 1099 k will lead to better tax passivity amongst small businesses owners.