Does Congress ever think about the consequences when they pass legislation?
In your home-based business, do you ever pay $600 or more ~ over the course of the entire year ~ to any vendors, suppliers, stores, print shops, etc.?
Auto ship purchases?
Post Office or UPS?
Staples or Office Depot?
Kinko's or Print Shops?
Surprise! Quietly tucked into the "Obamacare" health bill is a little item that has nothing to do with healthcare, but a LOT to do with your small business.
Here Is What Happened: Congress thinks there are a lot of businesses that are not reporting all their income and thus under-paying their taxes. So their brilliant solution? A new law will force every taxpayer who spends $600 or more with any individual or company, to file a 1099 at the end of the year for every single one of them.
Yes, that includes companies like Best Buy, United Airlines, and Vista Print, in addition to individuals such as independent contractors, freelancers, etc. This requirement specifically includes Corporations, which were formally exempt from this requirement.
As a home-based business owner you may need to begin collecting Employer Identification Numbers from the sales clerk the Mac Store, your cell phone company, your internet service provider and even your landlord.
The Commissioner of the IRS, recognizing the huge additional burden this places on taxpayers (as well as the IRS computer system!), claims they will be looking at a variety of options for minimizing the impact.
He has mentioned only ONE so far: Since the IRS already requires all credit card companies and banking institutions to turn over their complete records to the IRS every year (including overseas transactions), you may be able to get out of filing 1099s for companies you pay by credit card or debit card.
Although it is always better to pay any business expense with a credit card, because it provides additional documentation. We may soon have another incentive to do so.
Possible good news? This legal new requirement does not go into effect until 2012 so there is still time for Congress to come to their senses and rescind the law, or for the IRS to find ways to streamline the requirement.
Did You Hear The 'Cell Phone' Tax Deduction Announcement? The IRS has issued a "Safe Harbor" ruling That means "you do not have to follow this, but if you do, the IRS auditors will not challenge you". The ruling says that if you have a cell phone that is primarily for business purposes, you may claim 75% of the costs as a tax-deductible business expense and no special record keeping required.
You may find more tax saving strategies from Ronald R. Mueller, MDA, Ph.D. by visiting his website located at: http://HomeBusinessTaxSavings.com
Make it a great day!
Lloyd Dobson :)