1099-misc slips

It's time to prepare your 1099 slips for the year 2013.

When are they due: You should have them mailed or delivered to the receipient by January 31.

Who do I issue them to?

Per the IRS:

File Form 1099-MISC for each person to whom you have paid in the course of business, at least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest; at least $600 in rents, services (including parts and materials), prizes and awards, other income payments, medical and health care payments, crop insurance proceeds, cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish, or, generally, the cash paid from a notional principal contract to an individual, partnership, or estate; any fishing boat proceeds, or gross proceeds of $600, or more paid to an attorney during the year.

Exceptions:Some payments do not have to be reported on Form 1099-MISC, although they may be taxable to the recipient. Payments for which a Form 1099-MISC is not required include all of the following.

• Payments to a corporation except for payments for medical and health care payments (reported in box 6), purchases of fish for cash (box 7), attorneys fees (box 7), gross proceeds paid to an attorney (box 14), substitute payments in lieu of dividents or tax-exempt interest (box 8), payments to a federal executive agency for services (box 7)
• Payments for merchandise, telegrams, telephone, freight, storage and similar items
• Payments of rent to real estate agents. But the real estate agent must use Form 1099-MISC to report the rent paid over to the property owner. 
• Wages paid to employees (report on Form W-2, Wage and Tax Statement).
• Military differential wage payments made to employees while they are on active duty in the Armed Forces or other uniformed services (report on Form W-2).
• Business travel allowances paid to employees (may bereportable on Form W-2).
• Cost of current life insurance protection (report on Form W-2 or Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.).
• Payments to a tax-exempt organization including tax-exempt trusts (IRAs, HSAs, Archer MSAs, and Coverdell ESAs), the United States, a state, the District of Columbia, a U.S. possession, or a foreign government.
• Payments made to or for homeowners from the HFA Hardest Hit Fund or the Emergency Homeowners' Loan Program or similar state program (report on Form 1098-MA).

A couple of notes: LLC's are NOT by default corporations. LLC's are actually by default a partnership, and partnership's should be issued 1099's.  LLC's can elect to be treated as corporations, so if you are not sure, request your vendor to complete a form W-9.

Veterinarian services are considered medical and health care payments so you should issue 1099's to all of your veterinarians who have received at least $600 for services.  See memorandum issued by IRS in October 2013 clarifying this point.

Happy new year!

Did you know that the new year brings with it expiration of several tax deductions? And a new Health Insurance Penalty?

Some expiring tax provisions (unless extended-don't count on it !)

• $250.00 Teacher deduction for qualified classroom expenses
• Itemized deduction: Deduction for state/local income general sales tax
• Itemized deduction: Home mortgage insurance premium deduction
• Tuition and fees deduction
• 50% additional first year depreciation deduction

Health Insurance Penalty:

In 2014 those that don't have health insurance could be facing a tax penalty. Read up on the details here:

Free Software to Non-Profits

Equine Max has graciously stepped up to the plate once again and is donating EquineMax software to any non-profit organization that can use it.  Here is a link to their website for more information: Equine-Max Non-Profit Edition.

Last year EquineMax donated software to 81 horse rescues, animal shelters and rehabilitation centers throughout the world.

Simplified Option for Claiming Home Office Deduction

From my weekly NATP tax letter:

"The IRS has announced a simplified option that many owners of home-based businesses and some home-based workers may use to figure their deductions for the business use of their homes. The new optional deduction, capped at $1,500 per year based on $5 a square foot for up to 300 square feet, is available starting with tax year 2013. Though homeowners using the new option cannot depreciate the portion of their home used in a trade or business, they can claim allowable mortgage interest, real estate taxes and casualty losses on the home as itemized deductions on Schedule A. These deductions need not be allocated between personal and business use, as is required under the regular method. Business expenses unrelated to the home, such as advertising, supplies and wages paid to employees are still fully deductible. Further details on the new option can be found in Revenue Procedure 2013-13.

2013 Standard Mileage Rates

The Internal Revenue Service has issued the 2013 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2013, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 56.5 cents per mile for business miles driven.
• 24 cents per mile driven for medical or moving purposes.
• 14 cents per mile driven in service of charitable organizations.

The rate for business miles driven during 2013 increases 1 cent from the 2012 rate. The medical and moving rate is also up 1 cent per mile from the 2012 rate.

Fiscal Cliff News

Many of my clients are wondering what was renewed and what was not in the proposed tax bill.  Here is a good summary of new/expiring and extended tax provisions:
http://www.thetaxbook.com/updates/TheTaxBook/Updates/2013-01-02_Fiscal_Cliff_News.pdf

Business and Math

I just had to share this little snipped I read on a forum today.

Quote:

Originally Posted by Anonymous  DO I have to do the math thing about costs, labor, etc....I'm dead

Naw, you dont have to do the math.... but your chances for success are far greater if you do.  It reminds me a little of the two fellas who went into the hay business. They could buy hay from the neighbor for $1.00 per bale and found a market for it about 50 miles away where the guy offered them $100 bucks for every 100 bales they could bring him. After about a week of loading, hauling, and unloading hay they noticed they were not prospering.... the brighter of the two asked the other.... "Do you think we need to get a bigger truck?" 

Business and math go together.