1099 Rules for Business Owners in January 2018

Did you know there have been a number of changes and updates regarding the reporting rules for the 1099-Misc Form? Often times business owners guess what the rules are or simply choose not to file anything at all. Don’t make this mistake as penalties can add up fast.

So what are the rules? Generally speaking, business owners must issue a Form 1099-MISC to each person to whom you have paid at least $600 in rents, services (including parts and materials), prizes and awards, or other income payments. You would not need to issue 1099s for payment made for personal purposes.

Penalties can range from $30 to $100 per form ($1.5 million for the year), depending on how long past the deadline the company issues the form. If a business purposefully disregards the requirement to provide a correct contractor with a statement, it is subject to a minimum penalty of $250 per statement, with no maximum. This can be a costly mistake.

Basics:

Who are you required to send a Form 1099? You are required to send Form 1099 to vendors or sub-contractors during the normal course of business you paid more than $600, and that includes any individual, partnership, Limited Liability Company (LLC), Limited Partnership (LP), or Estate.
Who would be considered a Vendor or Sub-Contractor? Any person or company you have paid for services that isn’t your employee.
Are there any exceptions?

  • Vendors operating as S or C-Corporations (status is located on W-9)
  • Sellers of merchandise, freight, storage or similar items
  • Rent payments to or through real estate agents (typically property managers)

• What about credit cards or Paypal?
IRS excludes any payment you made by credit card, from Form 1099-MISC any payments you made by credit card, debit card, gift card, or third-party payment network such as PayPal. (These will be reported on Form 1099-K.)
What about lawyer’s fees? The government doesn’t trust that lawyers will report all of their income. If your lawyer is incorporated and you paid him/her over $600, based on the requirements you should send them a Form 1099.

As a business owner, request a W-9 from any vendor you expect to pay more than $600 before you pay them. By making this your business practice, you will know the vendor’s mailing information, Tax ID number, and if they are a corporation or not. New Year’s Resolution for 2018, make sure to get a Form W-9 from all your vendors before they can get paid.

Filling a 1099, is not easy. You CANNOT simply go to www.irs.gov and download the 1099 Forms and send them out to your vendors before the deadline. This pre-printed form is in triplicate requiring you to order the Forms from the IRS, pick them up at an IRS service center, or pick some up at the closest office supply chain.

Taxpayers are required to issue and mail out all Form 1099s to vendors and the IRS by January 31st, not February. Then, you have to compile all of your 1099s and submit them to the IRS with a 1096 by January 31st. Boy does this sound like fun? Reach out to Robert Palmer and Associates for assistance with filing your 1099-Misc Form. Our office can provide this service affordably and efficiently so you can stay focused on your New Year’s Resolutions and your updated Marketing Plan making money rather than filling out paperwork. If you need support or have questions, please contact Maggie Peeler in our office for this service at 803.547.7024 or email her directly at maggie@robertpalmerandassociates.com.

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Happy New Year





Robert Palmer and Associates will be closed on Monday, January 1st in observance of the New Year.  We wish you and your families a safe and happy new year and look forward to another great year in 2018.    

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Accrual-basis taxpayers: These year-end tips could save you tax

With the possibility that tax law changes could go into effect next year that would significantly reduce income tax rates for many businesses, 2017 may be an especially good year to accelerate deductible expenses. Why? Deductions save more tax when rates are higher.

Timing income and expenses can be a little more challenging for accrual-basis taxpayers than for cash-basis ones. But being an accrual-basis taxpayer also offers valuable year-end tax planning opportunities when it comes to deductions.

Tracking incurred expenses

The key to saving tax as an accrual-basis taxpayer is to properly record and recognize expenses that were incurred this year but won’t be paid until 2018. This will enable you to deduct those expenses on your 2017 federal tax return. Common examples of such expenses include:

  • Commissions, salaries and wages,
  • Payroll taxes,
  • Advertising,
  • Interest,
  • Utilities,
  • Insurance, and
  • Property taxes.

You can also accelerate deductions into 2017 without actually paying for the expenses in 2017 by charging them on a credit card. (This works for cash-basis taxpayers, too.)

As noted, accelerating deductible expenses into 2017 may be especially beneficial if tax rates go down for 2018.

Prepaid expenses

Also review all prepaid expense accounts. Then write off any items that have been used up before the end of the year.

If you prepay insurance for a period of time beginning in 2017, you can expense the entire amount this year rather than spreading it between 2017 and 2018, as long as a proper method election is made. This is treated as a tax expense and thus won’t affect your internal financials.

And there’s more . . .

Here are a few more year-end tax tips to consider:

  • Review your outstanding receivables and write off any receivables you can establish as uncollectible.
  • Pay interest on all shareholder loans to or from the company.
  • Update your corporate record book to record decisions and be better prepared for an audit.

To learn more about how these and other year-end tax strategies may help your business reduce its 2017 tax bill, contact us.

© 2017

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2018 Q1 tax calendar: Key deadlines for businesses and other employers

Here are some of the key tax-related deadlines affecting businesses and other employers during the first quarter of 2018. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.

January 31

  • File 2017 Forms W-2, “Wage and Tax Statement,” with the Social Security Administration and provide copies to your employees.
  • Provide copies of 2017 Forms 1099-MISC, “Miscellaneous Income,” to recipients of income from your business where required.
  • File 2017 Forms 1099-MISC reporting nonemployee compensation payments in Box 7 with the IRS.
  • File Form 940, “Employer’s Annual Federal Unemployment (FUTA) Tax Return,” for 2017. If your undeposited tax is $500 or less, you can either pay it with your return or deposit it. If it’s more than $500, you must deposit it. However, if you deposited the tax for the year in full and on time, you have until February 12 to file the return.
  • File Form 941, “Employer’s Quarterly Federal Tax Return,” to report Medicare, Social Security and income taxes withheld in the fourth quarter of 2017. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter in full and on time, you have until February 12 to file the return. (Employers that have an estimated annual employment tax liability of $1,000 or less may be eligible to file Form 944,“Employer’s Annual Federal Tax Return.”)
  • File Form 945, “Annual Return of Withheld Federal Income Tax,” for 2017 to report income tax withheld on all nonpayroll items, including backup withholding and withholding on accounts such as pensions, annuities and IRAs. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the year in full and on time, you have until February 12 to file the return.

February 28

  • File 2017 Forms 1099-MISC with the IRS if 1) they’re not required to be filed earlier and 2) you’re filing paper copies. (Otherwise, the filing deadline is April 2.)
  • March 15
  • If a calendar-year partnership or S corporation, file or extend your 2017 tax return and pay any tax due. If the return isn’t extended, this is also the last day to make 2017 contributions to pension and profit-sharing plans.

© 2017

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7 last-minute tax-saving tips


The year is quickly drawing to a close, but there’s still time to take steps to reduce your 2017 tax liability — you just must act by December 31:

  1. Pay your 2017 property tax bill that’s due in early 2018.
  2. Make your January 1 mortgage payment.
  3. Incur deductible medical expenses (if your deductible medical expenses for the year already exceed the 10% of adjusted gross income floor).
  4. Pay tuition for academic periods that will begin in January, February or March of 2018 (if it will make you eligible for a tax credit on your 2017 return).
  5. Donate to your favorite charities.
  6. Sell investments at a loss to offset capital gains you’ve recognized this year.
  7. Ask your employer if your bonus can be deferred until January.

Many of these strategies could be particularly beneficial if tax reform is signed into law this year that reduces tax rates and limits or eliminates certain deductions (such as property tax, mortgage interest and medical expense deductions) beginning in 2018.

Keep in mind, however, that in certain situations these strategies might not make sense. For example, if you’ll be subject to the alternative minimum tax this year or be in a higher tax bracket next year, taking some of these steps could have undesirable results. (Even with tax reform legislation, some taxpayers might find themselves in higher brackets next year.)

If you’re unsure whether these steps are right for you, consult us before taking action.

© 2017

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2017 – 12/12 – What you need to know about year-end charitable giving in 2017





Charitable giving can be a powerful tax-saving strategy: Donations are generally fully deductible, and you control when and how much you give. To ensure you receive your desired tax benefits, remember that, to be deductible on your 2017 return, a donation must be made by Dec. 31, 2017, to a “qualified charity” (one eligible to receive tax-deductible contributions). The charitable donation deduction hasn’t been proposed for elimination or reduction under tax reform, but there still may be reasons to maximize charitable giving this year. Contact us to learn more.

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Happy Holidays





Robert Palmer and Associates will be closed on Monday, December 25th and Tuesday, December 26th.  We will return to work on Wednesday, December 27th. We hope you and your family have a safe and happy holiday.   

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Make New Year’s resolutions to improve profitability

Many people scoff at New Year’s resolutions. It’s no mystery why — these self-directed promises to visit the gym regularly or read a book a month tend to quickly fade once the unavoidable busyness of life sets in.

But, for business owners, the phrase “New Year’s resolutions” is just a different way of saying “strategic plans.” And these are nothing to scoff at. In fact, now is the perfect time to take a critical look at your company and make some earnest promises about improving profitability in 2018.

Ask tough questions

Begin by asking some tough questions. For example: How satisfied are you with the status quo of your business? Are you happy with your profitability or had you anticipated a much stronger bottom line at this point in your company’s existence? If you were to sell tomorrow, would you get a fair return based on what you’ve invested in effort and money?

If your answers to these questions leave you more dissatisfied than pleased, your New Year’s resolutions may have to be bold. This doesn’t mean you should do something rash. But there’s no harm in envisioning next year as the greatest 12 months in the history of your business and then trying to figure out how you might get there.

Rate your profitability

To assess your company’s financial status, begin by honestly gauging your current performance. Rate your profitability on a scale of 1 to 10, where adequate working capital, long-term employees and customers, consistent growth in revenues and profit, and smooth operations equal a 10.

Many business owners will apply numbers somewhere between a 5 and a 7 to these categories. If you rate your business a 6, for example, this means your company isn’t tapping into 40% of its profit-generating capacity. Consider the level of improvement you would realize by moving up just one notch — to a 7.

Identify areas for improvement

One way to discover your company’s unrealized profit enhancement opportunities is to ask your customers and employees. They know firsthand what you are good at, as well as what needs improvement.

For instance, years ago, when the American auto industry was taking its biggest hits from foreign imports, one of the Big Three manufacturers was experiencing significant customer complaints about poor paint jobs. An upper-level executive visited the paint shop in one of its factories and asked an employee about the source of the problem. The worker replied, “I thought you’d never ask,” and proceeded to explain in detail what was wrong and how to solve it.

Get ready for change

If you have a few New Year’s resolutions in mind but aren’t sure how to implement these ideas or how financially feasible they might be, please contact our firm. We can work with you to identify areas of your business ready for change and help you attain a higher level of success next year.

© 2017

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Cutting costs when you’ve gone over budget

Year end can’t get here soon enough for some business owners — especially those whose companies have exceeded their annual budgets. If you find yourself in this unenviable position, you can still cut costs to either improve this year’s financial picture or put yourself in a better position for next year.

Tackle staffing issues

It’s easy to put off tough staffing decisions, but those issues may represent an unnecessary drain on your finances. If you have employees who don’t have enough work to keep busy, think about restructuring jobs so everyone’s productive. You might let go of extra staff, or, alternatively, offer mostly idle workers unpaid time off during slow periods.

You also need to face the hard facts about underperforming workers. Few business owners enjoy firing anyone, but it makes little sense to continue to pay poor performers.

Take control of purchasing

Are you getting the most out of your company’s combined purchasing power? You may have different departments independently buying the same supplies or services (for example, paper, computers, photocopying). By consolidating such purchases, you might be able to negotiate reduced prices.

To strengthen your bargaining power with suppliers when seeking discounts, pay your bills promptly. Even if it doesn’t help you land reduced prices, you’ll avoid late payment fees and credit card interest charges.

But don’t just continue to pay bills mindlessly. Review all of your service invoices — especially those that are automatically deducted from your bank accounts or charged to credit cards — to confirm you’re actually using the services. Consider canceling any services you haven’t used in 90 days.

Redirect your marketing efforts

Advertising costs can take a significant bite out of your budget, and the priciest efforts often have the lowest returns on investment. Cut programs and initiatives that haven’t clearly paid off, and move your marketing to social media and other more cost-efficient avenues — at least temporarily. A single, positively received tweet may reach exponentially more people than a costly directory listing, print ad or trade show booth.

A caveat

Resist the urge to solve your budget shortfalls with one dramatic cut — the risks are simply too high. The better approach is to execute a combination of incremental actions that will add up to savings. Contact us for a full assessment of your company’s budget.

© 2017

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