This just in from the IRS:
If you are donating to charities providing earthquake relief in Haiti, you may be able to claim those donations on your 2009 tax return. Here are 10 important facts the Internal Revenue Service wants you to know about this special provision.
1. A new law allows you to claim donations for Haitian relief on your 2009 tax return, which you will be filing this year.
2. The contributions must be made specifically for the relief of victims in areas affected by the Jan. 12 earthquake in Haiti.
3. To be eligible for a deduction on the 2009 tax return, donations must be made after Jan. 11, 2010 and before March 1, 2010.
4. In order to be deductible, contributions must be made to qualified charities and can not be designated for the benefit of specific individuals or families.
5. The new law applies only to cash contributions.
6. Cash contributions made by text message, check, credit card or debit card may be claimed on your federal tax return.
7. You must itemize your deductions in order to claim these donations on your tax return.
8. You have the option of deducting these contributions on either your 2009 or 2010 tax return, but not both.
9. Contributions made to foreign organizations generally are not deductible. You can find out more about organizations helping Haitian earthquake victims from agencies such as the U.S. Agency for International Development ( www.usaid.gov).
10. Federal law requires that you keep a record of any deductible donations you make. For donations by text message, a telephone bill will meet the record-keeping requirement if it shows the name of the organization receiving your donation, the date of the contribution, and the amount given. For cash contributions made by other means, be sure to keep a bank record, such as a cancelled check or a receipt from the charity. Receipts should show the name of the charity, the date and amount of the contribution.
For more information see IRS Publication 526, Charitable Contributions and Publication 3833 , Disaster Relief: Providing Assistance through Charitable Organizations. To determine if an organization is a qualified charity visit IRS.gov, keyword "Search for Charities". Note that some organizations, such as churches or governments, may be qualified even though they are not listed on IRS.gov.
Friday, January 29, 2010
Monday, January 25, 2010
Are You Ready for the Feb. 1 Tax Deadline?
Self-employed folks tend to focus on the April 15 tax deadline. But there's another deadline that is just a few days away.
Are you ready for the Feb. 1 deadline for filing 4th quarter payroll tax returns, year-end payroll forms like W-2's, and perhaps the most common self-employed tax form of all, the beloved 1099-MISC?
(NOTE: normally this deadline is January 31, but whenever a federal tax deadline falls on a Saturday, Sunday or legal holiday, the deadline is moved to the next business day.)
Let's spend some time today answering the question:
Who Should Receive A Form 1099-MISC?
Addressing this question will enable you to know if you are required to send out 1099's. And this post should give you a good idea as to whether you can expect to receive any 1099's.
Virtually every tax rule has a potentially long list of exceptions, limitations and otherwise mind-boggling list of finer points. Such is the case with the Form 1099-MISC reporting requirements. Ask a simple question: To whom am I required to send a Form 1099-MISC? Get a simple answer: Read the 8-page document entitled "Instructions for Form 1099-MISC" and watch your head spin.
What's a small business owner to do? The purpose of this post is to give you an introduction to the wild and wacky world of Form 1099-MISC do's and don'ts. Even then, this article will focus only on who gets a 1099-MISC for "non-employee compensation" that gets reported in Box 7.
Let's start with the basics. Fortunately, there are two basic rules that are somewhat easy to understand:
1. Only report payments to a given individual when the annual total is $600 or greater.
2. Only report payments made for services rendered to you in the course of your trade or business. Personal payments are not to be reported. Example: you can forget about payments to your lawn care man or other independent contractor who works on your home (electrician, plumber, appliance repairman, handyman, etc). But if you hire an accountant or attorney to do work for your business, and annual total is $600 or more, then you've got to issue a 1099-MISC to that service provider.
Now comes the fun part. There are many exceptions to the above general rules. For example, there's a long list of payments for which a 1099-MISC is not required, such as:
1. Payments to a corporation. Sole Proprietors, independent contractors, and self-employed people are the folks the IRS is trying to keep an eye on here.
2. Payments for merchandise. The main concern is services rendered not products sold.
3. Payments of rent to real estate agents.
4. Payments of wages to employees. Those go on Form W-2.
And then there are exceptions to the exceptions. For example, generally speaking, payments to corporations are excluded. But there are certain payments to corporations that should be reported on 1099-MISC, such as:
1. Medical and health care payments (these go in Box 6, not Box 7)
2. Fish purchases for cash. (See the next paragraph for more amazing facts about this one).
3. Attorney's fees. (Doesn't that one make you smile?)
And then there are aspects to 1099-MISC that are just plain fishy! Note that even though the main concern of Form 1099-MISC is payments for services rather than products, if you are in the fish business and purchase fish for resale, you are required to report annual cash payments of $600 or more to anyone who is in the business of catching fish. Cash payments include the following: coin, currency, cashier's check, bank draft, traveler's check, or money order. A cash payment does not include a check written against your personal or business account.
Are you ready for the Feb. 1 deadline for filing 4th quarter payroll tax returns, year-end payroll forms like W-2's, and perhaps the most common self-employed tax form of all, the beloved 1099-MISC?
(NOTE: normally this deadline is January 31, but whenever a federal tax deadline falls on a Saturday, Sunday or legal holiday, the deadline is moved to the next business day.)
Let's spend some time today answering the question:
Who Should Receive A Form 1099-MISC?
Addressing this question will enable you to know if you are required to send out 1099's. And this post should give you a good idea as to whether you can expect to receive any 1099's.
Virtually every tax rule has a potentially long list of exceptions, limitations and otherwise mind-boggling list of finer points. Such is the case with the Form 1099-MISC reporting requirements. Ask a simple question: To whom am I required to send a Form 1099-MISC? Get a simple answer: Read the 8-page document entitled "Instructions for Form 1099-MISC" and watch your head spin.
What's a small business owner to do? The purpose of this post is to give you an introduction to the wild and wacky world of Form 1099-MISC do's and don'ts. Even then, this article will focus only on who gets a 1099-MISC for "non-employee compensation" that gets reported in Box 7.
Let's start with the basics. Fortunately, there are two basic rules that are somewhat easy to understand:
1. Only report payments to a given individual when the annual total is $600 or greater.
2. Only report payments made for services rendered to you in the course of your trade or business. Personal payments are not to be reported. Example: you can forget about payments to your lawn care man or other independent contractor who works on your home (electrician, plumber, appliance repairman, handyman, etc). But if you hire an accountant or attorney to do work for your business, and annual total is $600 or more, then you've got to issue a 1099-MISC to that service provider.
Now comes the fun part. There are many exceptions to the above general rules. For example, there's a long list of payments for which a 1099-MISC is not required, such as:
1. Payments to a corporation. Sole Proprietors, independent contractors, and self-employed people are the folks the IRS is trying to keep an eye on here.
2. Payments for merchandise. The main concern is services rendered not products sold.
3. Payments of rent to real estate agents.
4. Payments of wages to employees. Those go on Form W-2.
And then there are exceptions to the exceptions. For example, generally speaking, payments to corporations are excluded. But there are certain payments to corporations that should be reported on 1099-MISC, such as:
1. Medical and health care payments (these go in Box 6, not Box 7)
2. Fish purchases for cash. (See the next paragraph for more amazing facts about this one).
3. Attorney's fees. (Doesn't that one make you smile?)
And then there are aspects to 1099-MISC that are just plain fishy! Note that even though the main concern of Form 1099-MISC is payments for services rather than products, if you are in the fish business and purchase fish for resale, you are required to report annual cash payments of $600 or more to anyone who is in the business of catching fish. Cash payments include the following: coin, currency, cashier's check, bank draft, traveler's check, or money order. A cash payment does not include a check written against your personal or business account.
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