We recently returned from a three day seminar sponsored by the IRS. While it wasn’t the most exciting experience we have ever had, we did learn some important, new things that we would like to pass onto you. Since there were several updates and changes made for this upcoming tax year, today we are only going to focus on changes made to the form 1099.
- The requirements for issuing form 1099-Misc have been very confusing the past year. The final word for the 2011 tax year is this: if your business pays an individual over $600, you must issue a 1099-Misc form for the amount you paid them. This must be submitted to the IRS and the person you paid. If you pay a corporation for services, you do not have to issue a 1099. The only exception to this is if you have an attorney. If you pay your attorney over $600 (and you usually do) then you must send him a 1099-Misc.
- Another 1099 issue you should be aware of is that credit card processing companies are now required to send information on every transaction to the IRS. So if you have a business that accepts credit or debit cards for payment, then each transaction will be reported to the IRS on a 1099 form. If you accurately record and report all your income from sales and services this will not be a problem for you. I knew a man many years ago that thought if he took payment with a credit card it was like getting paid cash and he didn’t have to report it. Even though that has never been true, if he did that now, the IRS would be aware of that income immediately.
- The last 1099 issue that has change is one that is good for everyone. Starting in 2011, when you get a 1099 for the sale of stocks and securities, what you paid for the stock and when you purchased it will be on the form. That will save people a lot of time because they won’t have to go through all their records to find out that information.
We hope these updates are helpful. Next week we will be going over more changes we learned at the conference. So make sure you check back!