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Time for 1099’s. Do you know the rules?
As an entrepreneur and business owner, it's imperative to understand the filing responsiblities associated with your business. This can sometimes be confusing and difficult to decipher. As a professional lightworker in the holistic, metaphyscial or spiritual field, it's a requirement by the IRS to issue 1099's if you intend to expense the costs associated with an independant contractor who provided services to your business.
If you have utilized the services of a contractor for your trade or business and paid them $600 or more within the 2016 calendar year, you may be required to issue them a form called a 1099-MISC.
These payments only pertain to those derived for the purpose of your trade or business, thus personal expenses are not applicable. These payments are connected to services, not products.
Here are some examples of services:
- Web Designer
- Graphic Artist
- Assistant
- Accountant
- Legal Services
- Consulting
- Commission
- Rent (for business space)
Services paid to a Corporation do NOT need to be reported on a form 1099, however services paid to an individual or an LLC are required. Upon engaging someone in services, request that they complete a form called a W-9. This form captures their name, Tax ID and address.
The IRS has a right to impose penalties for those who fail to report and file 1099's. If it's found that the negligance was intentional, the penalty is significantly increased.
Reviewing your records at the end of the year with your tax accountant can help reduce the risk of oversight. Also note that the 1099's are due to the recipient by JANUARY 31, 2017.
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