This is HUGE...

[jwmbishop]

As we all (hopefully) are aware - whenever you as a business (or hobby) pay an individual more than 600 in any one tax year, a 1099misc must be submitted to that individual and a copy to the IRS. Currently - if you pay another business entity you do not have to. However buried in the Health Care Reform Act is a new one.

 

Starting in 2012 anyone paying more than 600 to ANY VENDOR must now 1099 that vendor! Thats right - if you claim your hobby or business expense on the tax return - you must 1099 the vendor if total amounts exceed 600 per year! Want to claim that new tool box? Must 1099 SnapOn! How much do you spend (or write off) in fuel?

 

Apparently the obama admin thinks all people are crooks and is now requiring us to prove otherwise up front.

 

Heres a USA Today article on it

[Budman]

I was informed recently, JWM of another little diddy in the Obama Health Care Reform Act. Anything your employer pays toward your health care plan must be included in your W-2, and will be taxed as regular income to you.

 

I wasn't aware of that. Was anyone else on here?

[jwmbishop]

I was informed recently, JWM of another little diddy in the Obama Health Care Reform Act. Anything your employer pays toward your health care plan must be included in your W-2, and will be taxed as regular income to you.

 

I wasn't aware of that. Was anyone else on here?

Partially correct - the premiums must be REPORTED on the W2 - however it is not taxed.

 

For example you are salaried at 25000 with employer paid health ins prems of 4800 and participate in a 401K and make a contrib of 1000. Under the old rules, your W2 shows box 1 of 24000 (taxable wage), and box 3 and 5 (ss and medicare wage) of 25000, box 12 shows code D - 1000 explaining the difference between boxes 1, 3 and 5.

 

Under the new rule the ONLY change to your W2 would be to include the 4800 ins prems in Box 14* (don't know the code yet) - Box 14 is informational only - not necessarily subject to tax (some box 14 items like fringe benefit personal use of company car are)! If your employer includes the 4800 premiums amount in Box 1 (the amount you pay tax on) - they are doing it totally wrong. As I am a more than 2% owner of my company - my premiums have been reported like this - and not taxed - for the last 15 years!

 

Caveat being that if the employer is reimbursing you for YOUR payment of premiums it IS taxable and would be in box 1 as well - you then deduct YOUR payments on Schedule A to make it non taxable - not as beneficial because of the 7.5% (10% next year) floor and this is generally only done on highly compensated employees whose spouse has elective coverage at his/her employer.

 

This taxability misunderstanding has flown around the internet ever since the act was passed.

 

*The IRS may create a new box for ins prems on W2's for 2012 and beyond - this would then be coded as to whether or not taxable for clarity.

[Budman]

OH, my bad, I understand completely now!

[rebelracewriter]

Starting in 2012

 

Hopefully that year we'll have a new idiot in office that has the stones to repeal all that Obamacare B/S!!!!

[jwmbishop]

Starting in 2012

 

Hopefully that year we'll have a new idiot in office that has the stones to repeal all that Obamacare B/S!!!!

I believe we will. The idiot part anyway.

[jwmbishop]

End result:

 

If you buy supplies from WalMart rest assured the employees will know the correct employer identification number for the 1099 to enable you to meet your federally mandated legal obligations - even though they DON'T know where anything else is......

[NickHolt]

Here are the actual IRS Form 1099MSC instructions:

 

Click here to view >>> Form_1099msc.pdf

 

Nick

[jwmbishop]

Nick - this is the current year instructions, they still say 1099 is not required on payments to a corporation or payments for merchandise, telegrams, telephone, freight, storage, and similar items (which is true for the 2010 tax year).

 

However that is what is changing. Under the procedures that start with tax year 2011, ANY VENDOR to whom you pay more than 600 per year will need to be 1099ed. Landlord, telephone company, electric company, insurance company, supply distributors, tool vendors etc.

 

50.00 per 1099 penalty for failure to file accurate forms on any 1099 not done, or done with incorrect information such as EIN of vendor.

 

Personally I think its stupid and will overwhelm ALL businesses - not just issuing - but recieving. How many 1099's (each in an individual envelope) do you think Office Depot or TXU will receive? And of course they will have to be reconciled. (I think this passed as a way to bolster sagging USPS profits by increasing the amount of mailing needed to comply)

[Budman]

OK, J Wm, correct me if I'm wrong ............. from what you've said.

 

Here I sit, average Joe Schmo. Are you saying I will (in 2011) have to file with the feds a 1099 for each of these?

 

-----> Mortage Holder, Electric Company, Propane Co., Credit Card Co., Satellite Internet Provider, Satellite TV Provider, Solid Waste Disposal Company, etc, etc. etc, ............... or face a penalty for each if I don't?

 

If so, I'll have to hire an accounting staff for my own personal financial affairs!

[Blue Moon Motorsports]

OK, J Wm, correct me if I'm wrong ............. from what you've said.

 

Here I sit, average Joe Schmo. Are you saying I will (in 2011) have to file with the feds a 1099 for each of these?

 

-----> Mortage Holder, Electric Company, Propane Co., Credit Card Co., Satellite Internet Provider, Satellite TV Provider, Solid Waste Disposal Company, etc, etc. etc, ............... or face a penalty for each if I don't?

 

If so, I'll have to hire an accounting staff for my own personal financial affairs!

 

I understand that you will only have to do that if you are a businiss owner or self employed. So if you own Go Fast Racing and you buy tires from Jerry at THR over the season and race fuel at HMP and claim it on your Schedule C, you will have to send Jerry and HMP a 1099....

[PAPosse]

End result:

 

If you buy supplies from WalMart rest assured the employees will know the correct employer identification number for the 1099 to enable you to meet your federally mandated legal obligations - even though they DON'T know where anything else is......

 

1099's? Yes we have them. You may have difficulty finding them because they've been rolled back to 1088's.

[carguy]

So if any of my customers that over $600.00 on auto repairs are going to have to 1099 me or just the self employed customers?

[Pacecar]

What about race entry fees (e.g. TSRS) that would add up to more than $600 per year?

[stan]

I got a email from a friend and he sent a letter from IRS that the health insuraunce that you have where you work that was tax free will be added to your income at the end of the year and you will pay tax's on it, this is one way obama will pay for 30 million who don't have health insurance including illegals, like myself I have a supplmentary insuraunce for my medicare on my wife and me, I pay now 125 dollars each for a month just went up to 155 dollars a month and will be taxed now.

[Blue Moon Motorsports]

I got a email from a friend and he sent a letter from IRS that the health insuraunce that you have where you work that was tax free will be added to your income at the end of the year and you will pay tax's on it, this is one way obama will pay for 30 million who don't have health insurance including illegals, like myself I have a supplmentary insuraunce for my medicare on my wife and me, I pay now 125 dollars each for a month just went up to 155 dollars a month and will be taxed now.

 

Welcome to the........CHANGE!

[Budman]

Sure glad we got all that cleared up.

[racer61]

Im not to smart when it comes to taxes and forms, but it sure sounds like racing for free might turn out to be cheaper.

[jwmbishop]

If you win ANY amount it must be reported as income. Not claiming and expense against it does NOT relieve you of the obligation to 1099 your vendors. In fact not claimimg any expenses is a red flag - especially if you are eligible for tax credits that are based on income amounts! And the law says - if you pay any vendor" it does NOT say if you pay any vendor and actually get to use a deduction for it.

 

Lets say you win a total of 500 this year. You spent 650 on tires, 700 on racing fuel, 800 on entry fees, 200 on misc tools and 400 in parts. As a not for profit venture you are limited to deducting only expenses up to and not exceeding income. So you deduct the 400 in parts and 100 of the misc tools and have zero income from racing to pay tax on.

 

Two years later the IRS picks your SSN in the thumb screw lottery. The examiner starts asking questions like "how often did you race - was this a one time deal or weekly?" What was your TOTAL (not just deductable) fuel expenses, Tires, Entry Fees etc" (An "I don't recall" answer will only have them using the investigative powers to determine a closest amount estimate). Hmmm - did you 1099 these vendors?

 

Second option - report the 500 as taxable misc income and claim no expenses against it. Well if your AGI is in the EIC curve, or if there are any other attributes on your return that are based on your AGI - the IRS and Courts have ruled that you must report the allowable expenses related to accurately determine your AGI.

 

If you are a for profit (bonafide business) - well hopefully you already know which vendors this will entail. Last year I issued 16 1099. Under the new rules this will increase to 130.

 

Either way - the bottom line is if you are engaged in a trade or business (which you are if you are racing using anything anything except your own two feet) - whether its for profit or not - you better 1099 all vendors to whom you pay 600 or more!!

[jwmbishop]

I got a email from a friend and he sent a letter from IRS that the health insuraunce that you have where you work that was tax free will be added to your income at the end of the year and you will pay tax's on it, this is one way obama will pay for 30 million who don't have health insurance including illegals, like myself I have a supplmentary insuraunce for my medicare on my wife and me, I pay now 125 dollars each for a month just went up to 155 dollars a month and will be taxed now.

You are propagating an internet myth!

 

YES the insurance premiums will be reported on your W2 - NO they will not be taxable.

 

401K and other non taxed benefits have been on W2s forever (many employers have already been reporting premiums in box 14 - the new law just makes it mandatory). If you have paid taxes on these amounts come see me and I will get them refunded for you. If your tax preparer includes your health care premiums from your W2 in your taxable income - turn him in - he's crooked (or at least too stupid to maintain the integrity of tax professionals - which is why ALL paid pros must be certified starting this year - the IRS is trying to weed out the many idiots doing this important and complex task improperly).

 

If you prepare your own taxes and include your premiums in taxable income based on what you read in the alarmist and ill informed email that has widely circulated our spam boxes - well you get what you pay for - but again come see me and I'll get ya fixed right up.

[rebelracewriter]

So let me get this straight....since right now I'm basically self-employed.....

 

I'm going to 1099 Valero/Shell/etc. if its over $600 in fuel used to get to work/give bids

1099 HEB for my lunch expenses(I take my own)

1099 Lowes/Home Depot for parts/supplies/tools/etc.

1099 Wally World for my work clothes/boots/gloves

1099 KPUB for electric(since my home is my business)

1099 Sprint for cell service(business phone)

Damn this list could go on forever....that's B/S!!!!!

 

Was this crap something else buried in Obamacare?

"We'll just have to pass the bill to know what's in it." Nancy(stoneface) Pelosi....BTW do her botox treatments get paid for by us?

[dano36]

It could be a better idea to wait until the instructions are published for a Tax year before making all these assumptions. I am not saying the instructions will be any clearer than what is being said on this thread but each tax years instructions are not published until around the end of that tax year. And we are talking 2012 here, not 2010.

[jwmbishop]

So let me get this straight....since right now I'm basically self-employed.....

 

I'm going to 1099 Valero/Shell/etc. if its over $600 in fuel used to get to work/give bids

1099 HEB for my lunch expenses(I take my own)no- personal expense

1099 Lowes/Home Depot for parts/supplies/tools/etc.

1099 Wally World for my work clothes/boots/gloves

1099 KPUB for electric(since my home is my business)good q - this is both personal and busness

1099 Sprint for cell service(business phone)

Damn this list could go on forever....that's B/S!!!!!

 

Was this crap something else buried in Obamacare?

"We'll just have to pass the bill to know what's in it." Nancy(stoneface) Pelosi....BTW do her botox treatments get paid for by us?

 

Everything else is answered affirmative.

[jwmbishop]

It could be a better idea to wait until the instructions are published for a Tax year before making all these assumptions. I am not saying the instructions will be any clearer than what is being said on this thread but each tax years instructions are not published until around the end of that tax year. And we are talking 2012 here, not 2010.

They are not assumptions. I am pretty clear and lucid on the tax code - I will take and pass with at least 85% (acing in my areas of speciality), any test or quiz on current code. And the resources at my disposal such as the analyses by the National Association of Enrolled Agents, the Texas Socoety of Enrolled Agents and National Tax Institute - all of which I am a practising member, allow me to factually state that beginning with tax Year 2012 - "you will be required to issue form 1099 to any vendor in which you have paid 600 or more dollars to in the course of your trade or business".

 

using my planning skills I can also tell you factually - it will cost anyone meeting this requirement time and/or $$$$! As Chief Compliance Officer for a 20,000 client operation I am gearing up right now to train 183 people on how to perform their required due dilligence and advise the roughly 35% of our clients on how to stay in compliance with the tax code - that is my job and I do it well. I only have this year to warn them - they need to know so they can ramp up their recordkeeping now.

 

But yes by all means - please wait until after the fact to learn how. Its always better to pay someone to fix it than to make sure its done right going in. At least for your tax guy - he's gotta pay for that new beemer somehow!

 

joking aside - it is easier to comply on the go with your recordkeeping than to try to rebuild it in December when the IRS instructions come out. And having info such as SSN or EIN lacking will NOT be a acceptable excuse! Its the issuer of the form who is resposible to get it! I am already dreading hearing "I did not know I needed that" from over half of our business clients when we as the paid preparer have the due dilligence requirement by law to inform them. I have to add the acknowledgement of understanding for this into our client service agreements just to advise clients BEFOREHAND - or I can be liable for not informing them under IRS code!

 

And just think - you got it for free.....

[rebelracewriter]

So if I eat lunch at a restaurant it's deductible as a business expense......but (in order to SAVE money) I take a sack lunch it's not deductible? WTF!!!!!

 

Obamanomics at its finest......