Friday, 25 January 2013

FORM 1099-K INSTRUCTIONS


What is tax form 1099-K?
 Payments made with a credit card or payment card and certain other types of payment, including third party network transactions, must be reported on Form 1099-K by the payment settlement entity (PSE) under section 6050W and are not to be reported on 1099 Misc form. In simple words, a 1099-K form is used to report income that you received from credit cards, debit cards, or other electronic payments, such as eBay and Pay Pal. Businesses that will see their income reported on form 1099-K are those with more than 200 credit card transactions and more than $20,000 gross income from credit card sales.

Instructions to e-file form 1099-K:

Filer’s name, address, telephone number, and federal identification number boxes
Enter your name, address (including street address, city, state, and ZIP code) and telephone number in the box in the upper left corner. The telephone number must allow a payee to reach a person knowledgeable about the payments reported on the form. Enter your federal identification number in the top box immediately to the right.

Filer check boxes
Check the first (top) box in the section immediately below the FILER’S name, street address, city, state, ZIP code, and telephone number box if you are a PSE. Check the second box (bottom) if you are an EPF or TPP. If you are an EPF or TPP, enter the PSE’s name and telephone number in the box above the account number box at the bottom left of the form. The telephone number must allow a payee to reach a person knowledgeable about the payments reported on the form.

Account Number
The account number is required if you have multiple accounts for a recipient for whom you are filing more than one Form 1099-K. Additionally, the IRS encourages you to designate an account number for all Forms 1099-K that you file.

Box 1. Gross amount of merchant card/third party network payments
Enter in box 1 the gross amount of the total reportable merchant card/third party network payment transactions for the calendar year. Gross amount means the total dollar amount of total reportable payment transactions for each participating payee without regard to any adjustments for credits, cash equivalents, discount amounts, fees, refunded amounts or any other amounts. The dollar amount of each transaction is determined on the date of the transaction.

Box 2. Merchant category code
Enter the 4-digit merchant category code (MCC) used by the payment card industry to classify the payee for the merchant card payments reported on this Form 1099-K. If you use an industry classification system other than, or in addition to, MCCs, assign to each payee an MCC that most closely corresponds to the description of the payee’s business.

Note
TPSOs do not use MCCs to classify payees and should not complete this box.
If a merchant has receipts classified under more than one MCC, you may either: 
  • File separate Forms 1099-K reporting the gross receipts for each MCC, or
  • File a single Form 1099-K reporting total gross receipts and the MCC which corresponds to the largest portion of the total gross receipts.
Box 3 and 4
Reserved.

Boxes 5a through 5l
Enter in the appropriate box the gross amount of the total reportable payment transactions for each month of the calendar year.

There are service providers offering e-filing for 1099 forms and services such as download form 1099, however 1099online.com offers the most reliable and efficient e-filing for 1099 forms. 1099online.com is an IRS approved e-file provider having the most advanced and secure software to e-file 1099 forms. Filing 1099 forms with 1099online.com is quick, secure and very easy. moreover, there are many free services offered to businesses and individuals to e-file 1099 forms with 1099online.com.

Thursday, 24 January 2013

FORM 1099-K DETAILS


Any income that is received through credit and debit card transactions will have to be reported to the IRS by filing form 1099-K (Payment Card and Third-Party Network Payments).

Financial institutions and merchant card service providers will have to report the annual gross payments which have been processed either through debit or credit card using form 1099-K to IRS and to the merchants. The 1099-K form format is unlikely to be similar to the 1099 misc form which is used to report miscellaneous incomes earned by non-employees/independent contractors/freelancers.

As the new development has already taken off considering that January 2013 has already begun, it would be advisable that payment processors and business owners get ready, prepare the information they need and file form 1099-K and send a copy to the IRS and the recipients as early as possible.
Details of Credit Card and Merchant Payment Reporting
Banks and other payment settlement services will need to report gross annual receipts for each merchant. The income reporting will apply to "any transaction in which a payment card is accepted as payment". Thus, banks and other financial service providers will be reporting the total, gross amount of credit card and debit card payments for the year for each merchant.
Exception for De Minimis Payments
Reporting 1099-K form is not required if
·         A merchant's total payment transactions for the year does not exceed $20,000, and
·         The total number of transactions does not exceed 200.
·         A withdrawal of funds at an automated teller machine (ATM) via payment card, or a cash advance or loan against the cardholder's account
·         A check issued in connection with a payment card that is accepted by a merchant or other payee.
·         Any transaction in which a payment card is accepted as payment by a merchant or other payee who is related to the issuer of the payment card.





Tuesday, 22 January 2013

1099 form filing tax tips


Internal revenue service department says that Income tax filing season is underway and the last date to file your returns is April 15th 2013. Although the filing deadline is 3 months away, still taxpayers should gear themselves up for an early start to make the tax filing season easier for them.

"The first thing you'll want to do is to gather your records and round up any documents you'll need when filing your taxes," said Clay Sanford, an IRS spokesman in Dallas. "Get into the habit of keeping good records every year — saving receipts, canceled checks and other documents that support income or deductions you're claiming on your return."

He said Form W-2s and/or Form 1099s will be needed to file a tax return. He said those who do not receive their Form W-2 or 1099 by Jan. 31, or whose information is incorrect, should contact their employer or payer.

1099 misc forms are filed by businesses or individuals who hired the services of independent contractors for year 2012-2013. In other words, 1099 misc forms are used to report the income ($600 and above) earned by freelancers, independent contractors and any self-employed person hired on contract basis. Last date to send 1099 misc forms to recipients is January 31st 2013.

1099 Misc form is necessary for independent contractors as the form is required for the income tax filing purpose. Independent contractors will have to report to IRS any income they earn as freelancers through 1099 misc form. There is no way you can try to escape from reporting the income because your payer will also provide a copy of your 1099 misc form to the IRS. However, independent contractors can get certain tax relief from 1099 tax deductions:

Here is a list of 1099 tax deductions for independent contractors:

  • Inventory
  • eBay fees
  • PayPal fees or shopping cart fees
  • Shipping fees and supplies
  • Postage
  • Office supplies
  • Advertising
  • Mileage - use your car for business purposes
  • Phone - cell phone or second line
  • Bank charges - business checking account
  • Accounting and legal fees
  • Computer and software
  • Internet, website and faxing services
  • Contract labor - VA, coaches, web designer
  • Furniture and office equipment
  • Membership fees and dues
  • Continuing education
  • Home office expenses
Few names have been provided above. To find out the complete list or 1099 tax deductions which you are eligible for; kindly contact your tax professional or IRS.

Moreover, if you hired the services of a contractor and paid him income via PayPal, cash card or any third party payment network, then you do not need to issue him/her a 1099 misc form. The third party payment network will issue him/her form 1099-K (form for credit card and third party payment processors)

All about form 1099-K

Credit card merchants and third party payment networks such as e-bay, PayPal, Amazon and etc will have to start sending 1099 K forms to sellers who meet their criteria. If you earn money online by selling products, freelance writers and etc. then be ready to receive 1099-K for year 2012-2013.

The original bill proposed that credit card processors be required to file 1099s for each seller that had at least $10,000 in gross sales and 200 transactions. However, the original proposal has been a little modified where you must have at least $20,000 gross sales and 200 transactions before you are required to receive 1099-K form from third party network companies. Hence, less people are now affected by the 1099-K form filing.

How to file 1099 forms?

There are 2 methods to file 1099 forms. One is paper filing method and other is e-file method. Electronic filing method is the most preferred method among tax filers because of its easy and efficiency. You can either file 1099 forms through IRS website or avail expertise support of an IRS approved e-file service provider. Although there are many service providers who claim to be leaders and provide the best services, however one such service provider who has never let down its clients is 1099online.com. You can e-file 1099 forms on their website easily, swiftly and efficiently for as low as $0.55 per filing. They offer the lowest pricing in industry with top class and secure services.  

1099 tax filing for farmers

A 1099 tax form is an informational reporting form which is required to be filed with the IRS if any payment of $600 and above has been made by businesses or individuals to independent contractors in year 2012. The type of payments that are legible to be filed on form 1099 are: Rent, health care payments, services offered by freelancers, attorneys, royalties, Payments to crew members by owners or operators of fishing boats and etc.

In the case of agricultural sector, a farmer would have to file tax form 1099 for year 2012 if they want to write off the cost of the custom hay baling they had done this year. Services that require a farmer to file a 1099 form include: painting the barn, hoof trimmers or certified crop consultants.

Services that exempt you from filing 1099 forms include hauling freight which means livestock hauling or grain hauling is not required to be reported on 1099 form. Moreover, 1099 filing is not required to be reported for the purchase of equipment parts, seeds or fertilizers. Also a farmer is not supposed to file a 1099 form is he spends less than $600.

It is very necessary that farmers maintain their books on the payments they have made for year 2012-2013 because if they fail they file 1099 forms with the correct information then it can cost them huge penalties and losses.

Failure to file a 1099 form, could cost a farmer fine of $100 per form. If the internal revenue finds out that it was a willful neglect on the part of the farmer to file the 1099 form, then it can result in greater costs for the farmer in the form of $250 per filing. Sadly, small farmers who are unaware of such information fail to file the 1099 forms and thus have to face great adversities.

If business is not incorporated, then a 1099 form is required for all service providers. If the farmers are not incorporated, then they need to ask the business doing the service for their social security number (SSN)

Moreover, if a farm owner acquired above $600 as rent, then it is mandatory to file a 1099 form. Farmers have to talk to their landlords in order to get their 1099 forms.

1099 forms were started by the IRS as a step to fill the tax gap. Most of the income earned by non-employees/freelancers was being unreported and hence resulting in huge tax gap for the government. In order to narrow the gap, Congress came up with the 1099 forms.

For year 2012-2013, a 1099 form has to be sent to the recipient no later than January 31st 2013. There are 3 copies of the 1099 form. One is kept by the payer, one is sent to the recipient and the other copy is filed with internal revenue service.  Businesses are supposed to file the 1099 form with the IRS no later than February 28th 2013. However if you e-file 1099 form which obviously is a better choice, then the due date would be April 1st 2013

Electronically filing a 1099 form is a very easy and effortless method as compared to the paper filing method. Nowadays IRS has made it compulsory for businesses who have to file 250 1099 forms to electronically file them. If you fail to do so, then penalties are imposed on you. Also if you are filing less than 250 1099 forms, still you are encouraged to e-file as it is cost effective, quick, and secure and provide IRS confirmation in less time than anticipated.  You can either e-file through the IRS website or make use of an IRS approved e-file provider such as 1099online.com to e-file your 2012 form 1099 efficiently.

Sunday, 13 January 2013

DIFFERENCE BETWEEN FORM 1099 & W2


It’s the year end payroll filing season and you wondered why your company gives few people form W2 and to other it gives form 1099 misc? Well, Simple answer. Some people in the company are permanent employees and others are employed on a contract basis. What I mean to say is that if you receive form W2, it gives you the status of being a permanent employee of the company and if you receive form 1099 misc it suggests that you are self-employed and your services are hired by the company on a contractual basis.
                                         
Businesses Report the income of their employees on Form W2. This form reports total income, Social Security and Medicare Income, and it reveal how much has been withheld from employee pay for federal, state and local taxes. Form W2 is given to the employees no later than January 31st. Businesses have to e-file form W2 of its employees with the IRS by March 31st 2013 (As the filing deadline falls on Sunday, hence the IRS has changed the filing deadline to April 1st 2013). If you want to file through paper then the last date is February 28th 2013. However, it is always advised that you opt for E-file over paper filing not because IRS recommends it but compared to paper filing, e-filing is not at all complex but rather quick, and secure and IRS confirmation is sent via secure email in less time.

Unlike form W2, 1099 misc form is given by businesses to individuals whose services is hired for a short period of time on contract basis. Such individuals are called as independent contractors. Independent contractors are those individuals who do work for your company but who are not employees. You don't report withholding or Social Security/Medicare wages because you don't withhold income taxes for independent contractors and you don't deduct Social Security and Medicare from their payments. Businesses have to file form 1099 misc for independent contractors if income of $600 and above has been paid to them. 1099 misc has to be given to individuals no later than January 31st 2013. 1099 forms have to be electronically filed with the IRS as well no later than April 1st 2013. Paper filing option is also open for which the last date is February 28th 2013. However, it is always advised that you opt for E-file over paper filing not because IRS recommends it but compared to paper filing, e-filing is not at all complex, quick, and secure and IRS confirmation is sent via secure email in less time.

Moreover, you can file electronically through the Filing Information Returns Electronically System (FIRE System); however, you must have software that can produce a file in the proper format according to Pub. 1220…It’s not that simple to use that software without any guidance. There are service providers for 1099 online filing but they only offer you the option to download the software and use it. That can be very complicating process and not a reasonable one. But one such IRS approved e-file service provider that I came across is 1099online.com. You can e-file and submit form 1099 Misc and other 1099 forms without having to download any software and without having any know about technicalities. 

So now that you know the difference between tax 1099 misc and form W2, you can know better which one is for you and why.

TYPES OF 1099 FORMS


1099 is a form that is shown about your income received besides from your regular salary or wages. Below given are the few examples of income types that reported on 1099 forms.

Thursday, 10 January 2013

IRS filing - tax form 1099


The 1099 tax form will have the name of their corporation, LLC or business name and it will also have your information on the 1099 form. The total amount of money you made from them will be the information the IRS will count as income made by you.
If you own your own business and sub-contract yourself out to render services to a client of yours, then they may give you a 1099 tax form at the end of the year. Their accountant will send it to you with all of the accurate information about you and how much money you made during the year.

Income Other Than Wages Salaries and Tips
The 1099 IRS federal tax form is used to report income to the government that does not come from wages, salaries or tips. Two papers will be made, one for the payer and one for the payee. The form 1099 is usually used by independent contractors who are non-employees.
If you have paid a contractor at least $600.00 for the year, then you will have give him or her a 1099 tax form. If you have received $600.00 or more from a client you rendered services to, then you should receive a 1099 form from the client. If they don't give 1099 form to you, then you must still report the income on your federal tax return form.

Electronic Filing of IRS Federal Tax Form 1099
If you are the payer and you have 250 1099 forms or more, you must file the 1099 tax forms electronically. If you have less than 250 and you file in paper form or you may also chose electronic filing method, for more information on all of the 1099 tax forms, you may need to visit 1099online.com.

Payee, Freelancers, Sole Proprietorship, Self-Employed
If you are the payee, then you will use the information on the 1099 tax form to complete your own income tax return form. You will have to attach the 1099 tax form to your tax return. What you will probably do is file a 1040 with a Schedule C attached. This is the way most self-employed (Sole Proprietorship) people file their federal income taxes. The 1099online is user friendly website where you may file the form 1099 very quickly and accurately.