Am I Required To File A Form 1099? Counting the Beans for Your Contractors

Wed, 27 Jan 2021 11:12:19 -0700

As with most things tax related there is no simple answer. When it comes to issuing 1099's from your company this is the case.

The purpose of the 1099's is for the IRS to track what is paid from your business to other businesses and individuals for services.

In the past, before the 1099 requirement, the IRS could not track service payments as the identifying numbers were not obtain related to the payments made. Businesses were not required to validate the payments so if they had a check written and an invoice that was all that was required. In a large percentage of the businesses and individuals receiving the payment the income was not reported. This "loophole" was not very popular with the IRS so they implemented a requirement for obtaining the social security number or EIN for the person or businesses providing the service work. Hence the W-9 requirement and the issuance of the 1099's.

If you are purchasing services the best practice is to obtain a W-9 from the businesses and individuals. More importantly is that you need to issue the required 1099's. In recent years the IRS tracking software is becoming increasingly good at determining non-compliance.

In 2021 the penalties are increasing for non compliance and can reach $550 per 1099 not filed. The filing deadline without penalty is February 1, 2021.

There are a number of exclusions on this requirement so give me a call at (303) 351-2852 and we can discuss this.

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How To Maximize Your Tax Deductions? Meals - The Simple Answer

Sun, 24 Jan 2021 13:33:02 -0700

Here are the General rules:

To deduct beverages and meals for themselves or employees they must;

All of the following must apply;

A. Travel out of the local tax area. Typically this would be more than 50 miles from the place of business;

B. There has to be a business reason to purchase or reimburse themselves or employees;

1. Substantial rest required (more than 4 hours); or

2. Overnight stay;

C. Specific documentation on each expense;

1. Name of individual(s);

2. Receipt of the expense;

3. Specific purpose of the expense.;

D. Business reason for the expense.

There are a small number of exceptions.

De minis expense - Occasionally purchasing a meal for employee(s) (Once a month or quarter)

Company events - Once or Twice a year.

Marketing to a client or the general public.

(All exceptions must have documentation; who,what,when and when)

From my years of experience, meal expenses are the first item reviewed in an audit.

(Think of this issue in the broader terms that the IRS views them. Anyone can start a business Today you can start one in minutes. Why won't everyone start a business and make their family members employees (Nothing wrong with this). Purchase all of the meals for themselves and their family as a business expense. Congress and hence the IRS has developed limits on what is considered a deduction from business.)

The IRS considers any expenditure outside the above restrictions as compensation that the employer would be subject to payroll tax when purchased for an employee. When this occurs they will charge penalties, including the Trust Fund Recovery Penalty (100% of the amount not paid), plus interest.

Take a look at the exceptions and utilize them with documentation. In 2021 & 2022 these expenses can be deducted at 100% (Purpose of this was to kick start the restaurant industry)

If you have any questions let's set up a meeting to discuss this area. I would love to help you maximize the deduction and ensure that it meets the IRS complex regulations.

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Peak Accounting Service - Bean Blog #tax rules

Am I Required To File A Form 1099? Counting the Beans for Your Contractors

How To Maximize Your Tax Deductions? Meals - The Simple Answer