Showing posts with label tax preparation. Show all posts
Showing posts with label tax preparation. Show all posts

Wednesday, December 22, 2010

1099 MISC – Reporting Requirements & How-to in QuickBooks

On December 15th the Senate passed the 2010 Tax Relief Act and extended the Bush-era tax cuts. However, the House still needs to knock heads for approval. So, I am holding off on presenting the effects of the Tax Relief Act until it has “officially” passed.


Since I get a lot of calls in January about 1099’s MISC, I decided that this would be a great topic for year end. For those who don’t know, a 1099 MISC is a tax form used to report miscellaneous income, including income earned as an independent contractor.

To begin the process, you must obtain a completed W9 from the individual who will be receiving the income. Ensure that the name is the individual’s name, not the business name. The business name has a separate line. However, the business would be correct for a partnership, limited liability company or corporation.

Who gets a 1099? Individuals, partnerships and most limited liability companies would be candidates if they meet the income criteria. S-Corporations and C-Corporations do not generally receive 1099s.

Due dates for the 1099-Misc are:

To the Recipient – File Copy B is due January 31. This due date is extended if you are reporting payments in boxes 8 or 14.

To the IRS – File Copy A is due February 28. If you file electronically, the due date is March 31. To file electronically you must have the appropriate software.

You can order 1099 forms from the IRS and they are FREE!




Box 1 – Rents $600.00 or More:

For real estate rentals paid for office space, machine rentals.

Box 2 – Royalties $10 or More:

For gross royalty payments made, which are usage-based payments made by the Licensee to the Licensor for use of intangible property (music, intellectual property, franchise payments).

Box 3 – Other Income $600 or More:

For award money or merchandise (report at fair market value), sweepstakes prizes or game show winnings received. This would not be used for reporting gambling winnings; a W2G is the form used to report those winnings.

Other Income would also include monies received for participating in medical research studies, punitive damages. There is actually a comprehensive list on the IRS web site..

DO NOT include in box three payments made for services received. This is considered non-employee compensation and would be reported in box 7.

Box 7 – Nonemployee Compensation $600 or more

For someone who is not your employee that you paid for services in the course of your business. This non-employee can be a sole proprietor, a partnership, a limited liability company (LLC) or an attorney. Examples of payments made that would be subject to non-employee compensation reporting would include:

Professional Services: This is your independent contractor: accountants, architects, consultants, computer guy/gal, cleaning person, coach, etc.

Travel reimbursements: Paid to an independent contractor (IC) and IC did not report the expenses under an accountable plan. An accountable plan is when an expense report is completed and receipts are presented for reimbursement.

Bartering of services between individuals in the course of their business: For example, I hired my client, ABC Flooring to install a new floor in my office. In exchange I will prepare his/her tax return. No money is exchanged, but this still holds as a reportable event.

Fringe Benefits to ICs: This may include a company car, health insurance, life insurance, free services, etc.

Legal Services: All attorney fees are reported regardless if the attorney is a corporation.

I only listed a few of the many reasons why you would report non-employee compensation on a 1099. Here is a complete list.

Box 14 – Gross Proceeds Paid to an Attorney

Report all gross proceeds made to an attorney during the course of your business even if the attorney is a corporation. Gross proceeds are different than fees in that gross proceeds are paid when a lawyer wins a settlement (the attorney’s cut).
As you can see, I did not cover every box on the 1099. For comprehensive instructions, visit the IRS web site.


Beth Bockenhauer is the owner of Beth Bockenhauer, CPA, a boutique accounting and CPA practice based in southern California. She started her career with five years of military service. She then worked for ten years as a small business owner, and holds a Bachelor of Science degree in accounting. Beth has worked in public accounting for the past seven years. For more information, visit www.bethbcpa.com

Thursday, October 14, 2010

Top 5 Essentials for Closing Out Your Fiscal Year

It’s that time of the year again. Are you prepared to close out 2010? Do you have your financial records ready for your CPA or tax preparer? If your answer is a resounding NO, then keep reading.

You told yourself after last year’s year-end fiasco that you wouldn’t let that happen again, but the next thing you know, it’s December 31st. Then it’s March 15th and your CPA or tax professional is screaming for your financial records. You’re stressed and end up having to file for extensions, which results in penalties and interest. Take charge this year! Break the cycle and take control by using the following “5 Essentials for Closing Out Your Fiscal Year.”

1.) Make an appointment with your CPA or tax preparer, and meet with your in-house accounting staff. Your CPA or tax preparer should provide you with a list of items that they will need to start working on your taxes. The sooner you and your accounting team can get started, the easier your year-end closing process will be.

2.) Organize your financial records, preferably by month. Make sure you have back-up for all transactions. Your files should be organized with financial reports on top, followed by bank and other statements with reconciliation reports, and your transaction back-up (check stubs, receipts, deposit slips, etc) attached.

3.) Do an inventory of your equipment and other assets. If any items were added or removed, your CPA or tax professional will need to know so they can properly account for them.

4.) De-clutter. Toss any items marked for follow-up that are not significant to your accounting. They are most likely expired or no longer relevant. If you are not sure, place them in a separate file to be reviewed by your CPA or tax preparer.

5.) Review your current accounting system with your team and make adjustments to put in place for next year. The point of this is to avoid the stress for next year by planning now; you will eliminate the hassle and create a system that puts you in control of your business.

Not sure where to start? Management Consultants of America, can help. We specialize in systems development. We can take your drawers full of financial records and prepare them for year end. Call (866) 380-0745 now for your free consultation or visit us at www.bookkeepingonsteroids.com

 

LaVonne Shields
QuickBooks Expert and Consultant, LaVonne Shields has over 10 years of experience working in several industries (including banking, real estate, construction and non-profit). Her specialized training and consulting services help to provide peace of mind and relieve stress when it comes to bookkeeping and accounting all while improving the bottom line. She is the author of “Bookkeeping on Steroids,” and an instructor for the Inland Empire Women’s Business Center in San Bernardino.