It's a new fiscal year, which means it's time to start filling out and filing your 2012 1099 forms if you want a stress-free tax season.
As you probably know, small business owners file self-employment taxes every fiscal year. If you haven't done it before, it's a little more complicated than the 1040 form that most people fill out. Among the requirements: You have to file a 1099 form for any taxable income that doesn't show up on a W-2 form.
You can spend hours reading through the IRS' website about all the changes and updates. To help you out, here are three tips that every small business owner should know:
- Make sure you send and receive the correct 2012 1099 forms. There are many different types of 1099 forms, which the IRS refers to as "information returns." Most must be mailed to recipients this month, and then reported to the IRS in February. For employers who deal with independent contractors, Form 1099-MISC should be on your to-do list right now; you may also soon be receiving a Form 1099-K from each third-party payment processing service that you used in 2012.
- 1099-MISC forms should go out now. Business owners have until Jan. 31 to send out 1099-MISC forms to any individual who was paid $600 or more for services in the past year. This doesn't apply to corporations or LLCs that were paid for services, but it does apply to contract employees and individual contractors. You then have until the end of February to file the forms with the IRS. But make sure you give the payee time to review the 1099-MISC and correct any mistakes.
- Pay attention to the 1099-K. This month, most businesses should receive a 1099-K from every payment processor you worked with during the year. This includes banks, credit card companies, and services like PayPal. The 1099-K was introduced last year, and it's only for businesses that sell more than $20,000 in goods or services through at least 200 transactions in a calendar year. Business owners should use their 1099-K forms as a way to check their calculations when completing their tax returns.
It's still early enough to complete your 2012 1099 forms with minimal stress. But to make the process even easier, you may want to review the documents with an experienced tax lawyer so you know there won't be any problems.
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- Forget the Fiscal Cliff: Focus On Forms 1099 (Forbes)
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