Important New Tax Info for Instructors

[psychoswooper 2]

Posted here because this applies to every "Independent contractor" out there.

New Tax Law (part of Health Care Bill) requires every business (if you are a contractor, you are a business) to issue 1099's to any entity to which it pays more than $600 in a year for goods or services. Example: You buy a new container..send Mirage a 1099. A new canopy? Send PD a 1099. Make $600 or more of currency jumps at a DZ, send them a 1099. Blank Dvds, memory sticks mailer from Staples? Send them a 1099.
New video camera from BestBuy? send them a 1099; or be in non-compliance of Federal Tax Law.
If this doesn't sound like fun to you, contact your congressman. This needs to be repealed.

[jimjumper 25]

The collectibles industry, (coins, stamps, antiques, etc.) has been fighting this for some months now. The last attempt at repeal was shot down. I don't know if it was in the Senate or the House. I think that the first year the IRS recieves the massive influx of 1099's it will be fixed in a hurry. Maybe we can fix the unenployment problem by hiring millions of people to verify 1099's!

[livendive 8]

I've been doing this for several years now, for "services", i.e. any contractor who does more than $600 of packing/instructing for me gets a 1099. I've never thought to 1099 my phone providers etc...I just keep those bills and deduct them as business expenses. 1099ing EVERYONE would be an administrative nightmare, and I doubt it was intended, if it's even required. Are you asking all your suppliers and retailers for their EINs?

Blues,
Dave

"I AM A PROFESSIONAL EXTREME ATHLETE!"
(drink Mountain Dew)

[chuckakers 425]

Quote

Posted here because this applies to every "Independent contractor" out there.

New Tax Law (part of Health Care Bill) requires every business (if you are a contractor, you are a business) to issue 1099's to any entity to which it pays more than $600 in a year for goods or services. Example: You buy a new container..send Mirage a 1099. A new canopy? Send PD a 1099. Make $600 or more of currency jumps at a DZ, send them a 1099. Blank Dvds, memory sticks mailer from Staples? Send them a 1099.
New video camera from BestBuy? send them a 1099; or be in non-compliance of Federal Tax Law.
If this doesn't sound like fun to you, contact your congressman. This needs to be repealed.

Issuing a 1099 to a contractor or service provider is pretty standard stuff. One would think a receipt for goods purchased would be sufficient.

I'd like to hear a CPA's view on the law you are talking about.

Chuck Akers
D-10855
Houston, TX

[pilot-one 0]

To issue a 1099 you first need to acquire a W9 from that entity.......good luck with that as most companies are pretty tight with their info.
Sounds like a huge cluster fuck to me that hopefully is going to be repealed now that we've got rid of some of the idiots that voted for it.

[tkhayes 348]

you were always required to send a 1099 to an entity that you paid more than $600/yr to. The new law is requiring that you send one to Corporations as well. Prior you did not need to.

This law is still being debated and may not survive due to the overload of paperwork that may ensue. i.e. Skydive CIty will have to send a 1099 to Walmart for the TV it bought.

THat does not make sense, nor is it supported by any level of government. I think the intention was otherwise, but the writers of the legislation boobed.

[wayneflorida 0]

Starts 1 January 2012

[mbondvegas 0]

Quote

Starts 1 January 2012

True. And it will probably be repealed (or at least amended) before then.

If it is not repealed/amended, it will at least not apply for most skydiving gear purchases or purchases from Staples, Best Buy, etc...as most of you probably pay for such purchases with your Debit or Credit Card.

Credit and Debit Card purchases will be exempt from this new rule.
http://www.irs.gov/newsroom/article/0,,id=225029,00.html
http://money.cnn.com/2010/07/09/smallbusiness/irs_1099_flood/index.htm

Disclaimer: This is not tax or legal advice. You should consult your own Attorney or Tax Advisor.

- - -
I am not afraid of tomorrow, for I have seen yesterday and I love today.

[Fast 0]

Quote

you were always required to send a 1099 to an entity that you paid more than $600/yr to. The new law is requiring that you send one to Corporations as well. Prior you did not need to.

This law is still being debated and may not survive due to the overload of paperwork that may ensue. i.e. Skydive CIty will have to send a 1099 to Walmart for the TV it bought.

THat does not make sense, nor is it supported by any level of government. I think the intention was otherwise, but the writers of the legislation boobed.

I agree. It's likely that we are not going to have to deal with this for much more than 1-2 years. The resulting cluster fuck of paperwork that the IRS will have to deal with is going to be cost prohibitive. Maybe we're wrong, only time will tell.

As for the comment regarding W-9 forms, if you're a corporate entitity and accepting corporate checks for things then you will be required by law to provide a W-9 form to the person buying with a corporate check, it's not a question of if they want to give you the information, they have to. Hell, office max has their w-9 on their website so that wont be a huge deal.

The main change here is that in the past 1099s were only required to individuals for services rendered over $599. Now it applies to corporations and goods. It's annoying, but dunno how much can really be done about it.

~D
Where troubles melt like lemon drops Away above the chimney tops That's where you'll find me.
Swooping is taking one last poke at the bear before escaping it's cave - davelepka

[tuffyjensen 0]

Quote

The main change here is that in the past 1099s were only required to individuals for services rendered over $599. Now it applies to corporations and goods. It's annoying, but dunno how much can really be done about it.

This is the correct answer, they just added property as needing to be 1099 as well as services and Corporations will be included as well for those property and/or services and it is cumulative for the year not just per transaction (i.e Wal-Mart, Staples or any vendor). Might want to use Quick Books and make sure the accounts are setup properly to keep track of all this crap for you.

Also correct is that credit card purchases are exempt from the reporting. BUT, credit card/debit card processing companies are also required to report and issue the new 1099-K, (i.e. paypal), for the amounts they collect for you (hint they will not deduct their fees and will issue the 1099-K for the entire amount, you will have to keep track of those separately as a deduction and won't be able to do a net amount as income). This is how they will pick up those transactions and make sure the income is claimed. How dare they make all incomes be claimed.

You can be fined for not issuing these informational returns in a timely manner as well and that has been increased/doubled to $30 per return if within 30 days of due date, $60 if more than 30 days, but before August 1, and $100 per failure if after August 1st, with some very high maximums. Or a $250 per return penalty for intentional disregard. The same applies for payee statements with there own maximums as well, yikes. So if you are 20 days late filing 15 1099 returns to the IRS it will cost you a $450 penalty, 30 days up till August 1st a $900 penalty, after August 1st a $1,500penalty and finally if you just don't file and they find out a whopping $3,750.

Yes what a mess, got to love our congress, there has only been over 4,000 tax law changes in the last 10 years, got to love my job security.

As a side note as well, if you are given a W9 and refuse to give your identifying number and contact info or give incorrect info that doesn't match the IRS database, then you are subject to something called back-up withholding and the payor will be required to withhold that at a current rate of 28%.

This will be very interesting to see how it all shakes out over the next year. I have read Congress is seriously considering a repeal of the reporting requirements.

Good Luck!

Be Safe and Have Fun, in that order!
Tuffy

[Andy9o8 2]

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I have read Congress is seriously considering a repeal of the reporting requirements.

Just an FYI; and not to push this into SC, but even if that passes the Republican-majority House, it will still require passage in the Dem-controlled Senate, and the signature of the President. And maybe the newest political climate will make that happen. But if it doesn't pass the Senate, it won't happen. Or if it does pass both houses but the President vetoes it, and the veto isn't overridden by two-thirds of both houses, it won't happen.

[scruffy 0]

If i remember correctly, the President specifically highlighted the 1099 provision in his press conference yesterday afternoon as something the congress should send to his office to take out because of the strain it would but on businesses as highlighted in this thread.

Peace, love and hoppiness

[matthewcline 0]

Good deal, I hope that that happens early.

Matt

An Instructors first concern is student safety.
So, start being safe, first!!!

[Andy9o8 2]

Quote

If i remember correctly, the President specifically highlighted the 1099 provision in his press conference yesterday afternoon as something the congress should send to his office to take out because of the strain it would but on businesses as highlighted in this thread.

Oh, cool; I hadn't read that detail of the news conference.

[scruffy 0]

I went ahead and pulled up a transcript, I may have been a little bit overzealous with my description of him saying they should do it...when he really said they should take a look at doing it

President Obama:

"Now, if the Republicans have ideas for how to improve our health care system, if they want to suggest modifications that would deliver faster and more effective reform to a health care system that has been wildly expensive for too many families and businesses and certainly for our federal government, I’m happy to consider some of those ideas.

You know, for example, I know one of the things that’s come up is that the 1099 provision in the health care bill appears to be too burdensome for small businesses. It just involves too much paperwork, too much filing. It’s probably counterproductive. It was designed to make sure that revenue was raised to help pay for some of the other provisions, but if it ends up just being so much trouble that small businesses find it difficult to manage, that's something that we should take a look at."

http://www.kaiserhealthnews.org/Stories/2010/November/04/health-reform-obama-republicans-election-news-conference-document.aspx?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+NewFromKaiserHealthNews+%28New+From+Kaiser+Health+News%29

Peace, love and hoppiness

[matthewcline 0]

Quote

I went ahead and pulled up a transcript, I may have been a little bit overzealous with my description of him saying they should do it...when he really said they should take a look at doing it

President Obama:

"Now, if the Republicans have ideas for how to improve our health care system, if they want to suggest modifications that would deliver faster and more effective reform to a health care system that has been wildly expensive for too many families and businesses and certainly for our federal government, I’m happy to consider some of those ideas.

You know, for example, I know one of the things that’s come up is that the 1099 provision in the health care bill appears to be too burdensome for small businesses. It just involves too much paperwork, too much filing. It’s probably counterproductive. It was designed to make sure that revenue was raised to help pay for some of the other provisions, but if it ends up just being so much trouble that small businesses find it difficult to manage, that's something that we should take a look at."

http://www.kaiserhealthnews.org/Stories/2010/November/04/health-reform-obama-republicans-election-news-conference-document.aspx?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+NewFromKaiserHealthNews+%28New+From+Kaiser+Health+News%29

It sounds like they hoped small business would not keep up and then they would be fined, for the revenue!

Matt

An Instructors first concern is student safety.
So, start being safe, first!!!

[tuffyjensen 0]

That is a given. That was a note stated in the text book from the University of Illinois Farm Tax School and is a very respected course. Of course it all has to happen first, and we should never get our hopes up when counting on the government to get anything done, so we will see.

Be Safe and Have Fun, in that order!
Tuffy

[JohnnyD 0]

Quote

It sounds like they hoped small business would not keep up and then they would be fined, for the revenue!

Matt

Income reporting (or lack thereof) in small businesses is on the IRS hit list for 2010. The 1099 reporting requirement was supposed to be a way to match up revenue.

[tuffyjensen 0]

Absolutely, we were informed that it is the biggest tax gap there is, under reported income from small businesses (especially of the cash type, i.e. restaurants, bars, vending machines etc.). And that the IRS is concentrating its efforts to close that gap as much as possible (from a recently retired agent). The IRS is in a bad spot to do this, since there is a huge portion of agents that were hired in the 70's and most of them have or are retiring soon, so until they are replaced with competent agents it will be tough for them (darn it).

Be Safe and Have Fun, in that order!
Tuffy