DEADLINE #1 - Feb. 28
February 28 is the last day you can contribute to Haiti earthquate relief efforts and deduct the contribution on your 2009 return. (Of course, you can still donate after February 28 and deduct the contribution on your 2010 return.) For details, see 1-29-10 blog post below, "How To Deduct Haiti Donations on 2009 Return."
DEADLINE #2 - March 1
March 1 is the deadline for filing Form 1096 with Copy A of Form 1099-MISC. You should be doing this if you sent 1099's to independent contractors to whom you paid at least $600 in 2009. For details, see 2-3-10 blog post below, "What Do You Do If You Forgot To Send Out 1099's By Feb 1?"
DEADLINE #3 - March 15
This is the due date for 2009 corporate income tax returns, both "S" Corporations (Form 1120S) and "regular" Corporations (Form 1120). Should you not be able to file by March 15, be sure to file an extension via Form 7004 and get an additional 6 months to file.
Got questions about your 2009 corporate income tax return? You can get fast, accurate, time-saving answers to those questions by taking advantage of my new "Tax Return Coaching Service", which begins on March 1. For details visit:
www.YouSaveOnTaxes.com/tax-return-coaching.html
Saturday, February 27, 2010
How To Get Fast Answers To All Your Tax Questions
Announcing:
How to get fast, accurate, time-saving, tax-slashing answers to all your tax questions . . .
www.YouSaveOnTaxes.com/tax-return-coaching.html
This new service begins on March 1 and continues until April 15, so check it out today!
Many Happy Returns,
Wayne
How to get fast, accurate, time-saving, tax-slashing answers to all your tax questions . . .
www.YouSaveOnTaxes.com/tax-return-coaching.html
This new service begins on March 1 and continues until April 15, so check it out today!
Many Happy Returns,
Wayne
Thursday, February 18, 2010
Critical Tax Forms for the Self-Employed
All Sole Proprietors must prepare Schedule C as part of their federal personal income tax return. But it's likely that you can't stop there. As the old saying goes - "That's not all!" There's a pretty good chance that by filing a Schedule C, you must also file several other forms that are related to Schedule C. Here's a list of those forms and their relationship to Schedule C.
Schedule SE, Self-Employment Tax.
Go to Schedule C, Line 31. If you have a profit on this line of $400 or more (i.e. your income is greater than your expenses), you will also have to file Schedule SE in order to calculate your federal self-employment (SE) tax, aka the "dreaded" self-employment tax. SE tax is the sole proprietor's version of the employee's social security and medicare tax, which are automatically withheld from an employee's paycheck by the employer. You take the amount from Line 31 of Schedule C and transfer it to Schedule SE, Line 2.
Form 4562, Depreciation and Amortization.
If you purchased any equipment or other so-called "depreciable fixed assets" for use in your business, you will probably have to complete Form 4562 to report those purchases. "Depreciable fixed assets" include both personal property like computers and peripherals, printers, office furniture, office equipment such as fax machines and telephones, other business machinery, as well as real estate such as business buildings. The rules for filling out Form 4562 are quite complex and you'll definitely want to get some help here. (i.e. Don't try this at home!) The end result is that your total expense for purchasing business equipment is transferred from Form 4562 to Schedule C, Line 13, Depreciation and Section 179 expense.
Form 8829, Expenses for Business Use of Your Home.
The so-called "Home Office Expense" is one of the best tax breaks for the Sole Proprietor. But it doesn't come without jumping though some very specific recordkeeping hoops. To get this deduction, you must complete Form 8829. Don't let the complexity of this form stop you, though. It could be well worth the time and effort. After doing Form 8829, transfer the amount from Line 35 (Allowable expenses for business use of your home) to Schedule C, Line 30.
Looking for more self-employed tax tips? For a free copy of the 25-page Special Report "How to Instantly Double Your Deductions" visit http://www.yousaveontaxes.com/.
Schedule SE, Self-Employment Tax.
Go to Schedule C, Line 31. If you have a profit on this line of $400 or more (i.e. your income is greater than your expenses), you will also have to file Schedule SE in order to calculate your federal self-employment (SE) tax, aka the "dreaded" self-employment tax. SE tax is the sole proprietor's version of the employee's social security and medicare tax, which are automatically withheld from an employee's paycheck by the employer. You take the amount from Line 31 of Schedule C and transfer it to Schedule SE, Line 2.
Form 4562, Depreciation and Amortization.
If you purchased any equipment or other so-called "depreciable fixed assets" for use in your business, you will probably have to complete Form 4562 to report those purchases. "Depreciable fixed assets" include both personal property like computers and peripherals, printers, office furniture, office equipment such as fax machines and telephones, other business machinery, as well as real estate such as business buildings. The rules for filling out Form 4562 are quite complex and you'll definitely want to get some help here. (i.e. Don't try this at home!) The end result is that your total expense for purchasing business equipment is transferred from Form 4562 to Schedule C, Line 13, Depreciation and Section 179 expense.
Form 8829, Expenses for Business Use of Your Home.
The so-called "Home Office Expense" is one of the best tax breaks for the Sole Proprietor. But it doesn't come without jumping though some very specific recordkeeping hoops. To get this deduction, you must complete Form 8829. Don't let the complexity of this form stop you, though. It could be well worth the time and effort. After doing Form 8829, transfer the amount from Line 35 (Allowable expenses for business use of your home) to Schedule C, Line 30.
Looking for more self-employed tax tips? For a free copy of the 25-page Special Report "How to Instantly Double Your Deductions" visit http://www.yousaveontaxes.com/.
Friday, February 5, 2010
Did You Get A 1099-MISC? Now What?
Did you receive a Form 1099-MISC and aren't sure what it means and/or what to do with it? This post will answer that question.
Form 1099-MISC is one of the most common tax forms in the world of the self-employed. And it's most common use is to report income made by sole proprietors who have performed services for other businesses. By "sole proprietor" I'm referring to self-employed people such as independent contractors, consultants or free-lancers who are in business for themselves but do not run their business as a corporation, partnership or multi-owner limited liability company (LLC).
If you fit that description of a self-employed person and performed services for another business, and that business paid you at least $600 during the year, the other business is required to send you a Form 1099-MISC by January 31 of the following year. The January 31, 2010 due date happens to fall on a Sunday, so the deadline for issuing 2009 1099's is automatically extended to the next business day of Monday, February 1, 2010. So you may have already received a Form 1099-MISC for 2009. If not, you could still get one soon.
If and when you get the 1099, take a look at Box 7, "Nonemployee compensation." This is the place on the form that your annual income from this other business will be reported. And this is the income that you must be sure to include on your Schedule C, because not only did you receive that 1099, but so did the IRS. In effect, then, the 1099-MISC serves the same function for the self-employed as a W-2 does for the employee - it tells you and the IRS how much income you made from one particular source.
Now that you know the basic purpose of the 1099-MISC, you probably have some questions, such as:
1. What do I do if I don't receive a 1099 from a business, when I know I performed services and received over $600 for the year? Whether or not you received a 1099, you are required to report all income.
2. What do I do if I don't receive a 1099 because I made less than $600? Sorry to sound like a broken record, but you are required to report any income you made, whether or not you received a 1099. Even if you made less than $600, just because you didn't get a 1099 does not excuse you from reporting the income.
Not getting a 1099 does not mean you don't have to report the income. If you made it, you're supposed to report it on your Schedule C. That's the law. And if you don't report all your income, you are part of the underground economy. (Shame on you!)
3. What do I do if the amount of income reported on the 1099 is incorrect? You should contact the business who issued the 1099 to resolve the discrepancy. If they made a mistake, they must issue a corrected 1099 to both you and the IRS. To be safe, you should wait until you receive the corrected 1099 before filing your tax return. You want to be sure that the 1099 amount agrees with your Schedule C income amount. If there is a difference between the total income on all your 1099's and the amount of income on your Schedule C, the IRS will eventually catch it and send you a letter demanding an explanation. Not good.
4. What do I do if I receive a 1099 after I filed my return? If you included the 1099 income on your return, do nothing, because you did report the income and there should be no problem. But if you didn't report the 1099 income on your return, you must amend your return to include the previously unreported income. This will result in additional tax you must pay, plus the possibility of late payment penalties and interest, depending on how much additional tax you owe and whether you pay it late.
Form 1099-MISC is one of the most common tax forms in the world of the self-employed. And it's most common use is to report income made by sole proprietors who have performed services for other businesses. By "sole proprietor" I'm referring to self-employed people such as independent contractors, consultants or free-lancers who are in business for themselves but do not run their business as a corporation, partnership or multi-owner limited liability company (LLC).
If you fit that description of a self-employed person and performed services for another business, and that business paid you at least $600 during the year, the other business is required to send you a Form 1099-MISC by January 31 of the following year. The January 31, 2010 due date happens to fall on a Sunday, so the deadline for issuing 2009 1099's is automatically extended to the next business day of Monday, February 1, 2010. So you may have already received a Form 1099-MISC for 2009. If not, you could still get one soon.
If and when you get the 1099, take a look at Box 7, "Nonemployee compensation." This is the place on the form that your annual income from this other business will be reported. And this is the income that you must be sure to include on your Schedule C, because not only did you receive that 1099, but so did the IRS. In effect, then, the 1099-MISC serves the same function for the self-employed as a W-2 does for the employee - it tells you and the IRS how much income you made from one particular source.
Now that you know the basic purpose of the 1099-MISC, you probably have some questions, such as:
1. What do I do if I don't receive a 1099 from a business, when I know I performed services and received over $600 for the year? Whether or not you received a 1099, you are required to report all income.
2. What do I do if I don't receive a 1099 because I made less than $600? Sorry to sound like a broken record, but you are required to report any income you made, whether or not you received a 1099. Even if you made less than $600, just because you didn't get a 1099 does not excuse you from reporting the income.
Not getting a 1099 does not mean you don't have to report the income. If you made it, you're supposed to report it on your Schedule C. That's the law. And if you don't report all your income, you are part of the underground economy. (Shame on you!)
3. What do I do if the amount of income reported on the 1099 is incorrect? You should contact the business who issued the 1099 to resolve the discrepancy. If they made a mistake, they must issue a corrected 1099 to both you and the IRS. To be safe, you should wait until you receive the corrected 1099 before filing your tax return. You want to be sure that the 1099 amount agrees with your Schedule C income amount. If there is a difference between the total income on all your 1099's and the amount of income on your Schedule C, the IRS will eventually catch it and send you a letter demanding an explanation. Not good.
4. What do I do if I receive a 1099 after I filed my return? If you included the 1099 income on your return, do nothing, because you did report the income and there should be no problem. But if you didn't report the 1099 income on your return, you must amend your return to include the previously unreported income. This will result in additional tax you must pay, plus the possibility of late payment penalties and interest, depending on how much additional tax you owe and whether you pay it late.
Wednesday, February 3, 2010
What Do You Do if You Forgot to Send Out 1099's by Feb 1?
Are you a small business owner or self-employed person who hires independent contractors? If so, you may be required by the IRS to send out a Form 1099-MISC to those people. This post will help you determine your obligation to issue those 1099's.
The basic rule works like this: Form 1099-MISC is used to report total annual payments made to independent contractors who made at least $600 during the previous calendar year. This 1099 must be given or mailed to the contractor by January 31 of the following year.
Note: Since January 31, 2010 was a Sunday, the deadline was extended to the next business day (Monday, Feb. 1, 2010).
The key here is whether or not the person who worked for you is self-employed. Obviously, this excludes employees. If you have employees, you give them a Form W-2 by January 31 (or Feb. 1) to report their compensation (wages, salaries, bonuses, and withholdings). And this also means you don't have to send out a 1099-MISC to corporations who provided services to your business.
The purpose of the 1099-MISC is similar to that of the W-2, but the goal here is to report income made by non-employees, not employees. And this is why the annual total income of self-employed contractors is reported in Box 7 of the 1099, "Nonemployee compensation."
In other words, the IRS is expecting you to provide a way to help them track the income of the self-employed. Does all income earned by sole proprietors get reported on 1099's? Of course not. Who knows how much is unreported. And self-employed people know that if they don't get a 1099, it's difficult and almost impossible for the IRS to figure out how much income a particular self-employed person made. And so many self-employed people take advantage of this situation and only report income if they get a 1099.
And so there are many self-employed people who make plenty of money but receive no 1099's, and report no income, even though the law says they are supposed to report the income whether or not they receive a 1099.
But back to you, the business that paid the money to the contractor. Do you really want to be part of the underground economy? If you take a deduction for payments to independent contractors but don't issue the corresponding 1099's, and you get audited, you are asking for trouble. Don't go there. Do the right thing and issue the 1099's.
What if the February 1 deadline has already passed? Go ahead and issue the 1099's anyway. Give the contractor a call right away and tell him you are sending him a 1099 as soon as possible. Why not do the right thing?
For details on how to comply with the 1099 reporting rules, download the Form 1099 instructions from the IRS website or consult with your tax professional. You'll want to send Form 1099-MISC Copy B to the self-employed person right away and Form 1099-MISC Copy A, along with Form 1096, to the IRS by March 1, 2010.
Here are the IRS links for 1099-MISC instructions:
http://www.irs.gov/pub/irs-pdf/i1099msc.pdf
http://www.irs.gov/instructions/i1099msc/index.html
The basic rule works like this: Form 1099-MISC is used to report total annual payments made to independent contractors who made at least $600 during the previous calendar year. This 1099 must be given or mailed to the contractor by January 31 of the following year.
Note: Since January 31, 2010 was a Sunday, the deadline was extended to the next business day (Monday, Feb. 1, 2010).
The key here is whether or not the person who worked for you is self-employed. Obviously, this excludes employees. If you have employees, you give them a Form W-2 by January 31 (or Feb. 1) to report their compensation (wages, salaries, bonuses, and withholdings). And this also means you don't have to send out a 1099-MISC to corporations who provided services to your business.
The purpose of the 1099-MISC is similar to that of the W-2, but the goal here is to report income made by non-employees, not employees. And this is why the annual total income of self-employed contractors is reported in Box 7 of the 1099, "Nonemployee compensation."
In other words, the IRS is expecting you to provide a way to help them track the income of the self-employed. Does all income earned by sole proprietors get reported on 1099's? Of course not. Who knows how much is unreported. And self-employed people know that if they don't get a 1099, it's difficult and almost impossible for the IRS to figure out how much income a particular self-employed person made. And so many self-employed people take advantage of this situation and only report income if they get a 1099.
And so there are many self-employed people who make plenty of money but receive no 1099's, and report no income, even though the law says they are supposed to report the income whether or not they receive a 1099.
But back to you, the business that paid the money to the contractor. Do you really want to be part of the underground economy? If you take a deduction for payments to independent contractors but don't issue the corresponding 1099's, and you get audited, you are asking for trouble. Don't go there. Do the right thing and issue the 1099's.
What if the February 1 deadline has already passed? Go ahead and issue the 1099's anyway. Give the contractor a call right away and tell him you are sending him a 1099 as soon as possible. Why not do the right thing?
For details on how to comply with the 1099 reporting rules, download the Form 1099 instructions from the IRS website or consult with your tax professional. You'll want to send Form 1099-MISC Copy B to the self-employed person right away and Form 1099-MISC Copy A, along with Form 1096, to the IRS by March 1, 2010.
Here are the IRS links for 1099-MISC instructions:
http://www.irs.gov/pub/irs-pdf/i1099msc.pdf
http://www.irs.gov/instructions/i1099msc/index.html
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