published December, 2012
Have you made payments to an individual or partnership from your business in amounts over $600? For non-employee compensation, we’ll issue 1099-MISC forms in January, 2013.
Now is the time to start gathering info for any vendors who need to receive 1099s from you. You need the (REAL) business name, address, tax ID# and amount paid.
Have you heard about the 1099-K? It is a new (as of last year) 1099 that credit card processors have to issue to their merchants – so Visa, Paypal, AmEx, etc will be sending statements to you, if you’ve accepted credit cards this year. A copy will also go to the IRS so they can match the income reported to your tax return.
Here’s the news: if you’ve paid vendors with a credit card or Paypal, you DON’T have to include those payments on a 1099-MISC (the 1099-K is filed instead of the 1099-MISC per IRS instructions). So, now you have to keep track not only of what you paid, but how payment was rendered. If you’re using QuickBooks and populate the check number field with the following:
QuickBooks will exclude the payment (as it should) from the regular 1099-MISC. (I guess they really like Chase bank, and really don’t care for AmEx.) This MIGHT make for less work (at least doing 1099s) but don’t worry, you make up for it in data entry.
So, what if you fail to exclude the credit card payments, and issue a 1099-MISC for the payments, and the credit card processor ALSO issues a 1099-K for the same income? The vendor may have some explaining to do on their tax return—and if this happens in reverse, we’ll have to explain it on your tax return.
Gone are the days of bringing a stack of 1099s into the office and saying “here’s all my income.” Some of your income may be duplicated if you accept credit cards, and you wouldn’t want to pay too much tax.