7-37, 60-41, 10-99… Part 1
Posted 10-26-2010 at 12:42 AM by Business Cornerstone Services
A sequence of numbers from an IQ test? A quarterback calling a last minute change of play? No, just some of the numbers that could mean a major headache to all companies in USA, but especially small businesses that do not have the resources or expertise to handle a potentially huge increase in accounting paperwork and tax procedures.
What do the numbers mean? 737 is the page number of the Patient Protection and Affordable Care Act of 2010 that details changes to section 6041 of the Internal Revenue Code of 1986 which will affect submission of tax form 1099 for the year 2012.
This series of articles is intended for informational use only and does not represent tax or legal advice; the information is believed to be correct at the time of publishing; the author cannot be held liable for any losses resulting from actions taken on the strength of the information provided.
If you need assistance with 1099s or any other IRS related form you are encouraged to visit the IRS Web Site and/or seek the services of a reputable tax lawyer.
Existing Laws
It might make for some heavy reading, but I would recommend at least skimming through the following links:
Section 6041 of the internal revenue code of 1986
IRS Instructions for completing form 1099-Misc for 2010
In summary, current law states that a business must file a 1099-MISC form for annual payments totaling $600 or more to consultants, contractors, freelancers and other service providers that aren’t incorporated so that the IRS has a record of these workers for whom the business would withhold taxes if they were regular employees. Both the contractor and the IRS need to receive copies.
Corporations typically would not receive a 1099; however there are exceptions such as law firms.
The sole-proprietors, partnerships and small businesses that provide these services are often known as 1099 Contractors.
1099 Contractor
A 1099 contractor is a term used to refer to the type of worker that contracts his or her services out to a business and is not an employee of that business. The term 1099 refers to the IRS form which must be submitted if a contractor receives $600 or more in a tax year from any given business.
1099 contractors are classed as being self-employed and as such are responsible for their own income and social security taxes and these are paid as quarterly installments against their projected tax responsibility for the year.
Deductions against this tax responsibility can reduce the amount owed, for example: home office costs, work related vehicle use, computer purchases, office consumables etc.
Starting from 1st January 2012, all businesses will need to account for all services and goods purchased from vendors that total $600 or more in the tax year.
The old exemptions have been removed to include corporations and even non-profit organizations such as charities, churches etc. will need to keep appropriate records and file 1099s in January 2013.
In Part 2 we’ll look at The New Legislation
What do the numbers mean? 737 is the page number of the Patient Protection and Affordable Care Act of 2010 that details changes to section 6041 of the Internal Revenue Code of 1986 which will affect submission of tax form 1099 for the year 2012.
This series of articles is intended for informational use only and does not represent tax or legal advice; the information is believed to be correct at the time of publishing; the author cannot be held liable for any losses resulting from actions taken on the strength of the information provided.
If you need assistance with 1099s or any other IRS related form you are encouraged to visit the IRS Web Site and/or seek the services of a reputable tax lawyer.
Existing Laws
It might make for some heavy reading, but I would recommend at least skimming through the following links:
Section 6041 of the internal revenue code of 1986
IRS Instructions for completing form 1099-Misc for 2010
In summary, current law states that a business must file a 1099-MISC form for annual payments totaling $600 or more to consultants, contractors, freelancers and other service providers that aren’t incorporated so that the IRS has a record of these workers for whom the business would withhold taxes if they were regular employees. Both the contractor and the IRS need to receive copies.
Corporations typically would not receive a 1099; however there are exceptions such as law firms.
The sole-proprietors, partnerships and small businesses that provide these services are often known as 1099 Contractors.
1099 Contractor
A 1099 contractor is a term used to refer to the type of worker that contracts his or her services out to a business and is not an employee of that business. The term 1099 refers to the IRS form which must be submitted if a contractor receives $600 or more in a tax year from any given business.
1099 contractors are classed as being self-employed and as such are responsible for their own income and social security taxes and these are paid as quarterly installments against their projected tax responsibility for the year.
Deductions against this tax responsibility can reduce the amount owed, for example: home office costs, work related vehicle use, computer purchases, office consumables etc.
Starting from 1st January 2012, all businesses will need to account for all services and goods purchased from vendors that total $600 or more in the tax year.
The old exemptions have been removed to include corporations and even non-profit organizations such as charities, churches etc. will need to keep appropriate records and file 1099s in January 2013.
In Part 2 we’ll look at The New Legislation
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