Year End Payroll and Accounting Processes
With Year End approaching for anyone on a January – December fiscal calendar, you’ll need to start planning to close out 2010 in your Sage Accpac system, and open a new year for 2011. Regardless of your fiscal year, you’ll need to close out Payroll. Because of this, December is typically one of our busiest months supporting our clients through this process. If you think you might need our assistance with year-end, now is the time to book your appointment. Every year, we get a rush of last minute requests, which ultimately leads to delays for the companies who ask for help last. Beat the rush and stay on schedule – contact your local office today.
New 1099 Rules Affect 2012 Reporting
An all-but-overlooked provision of the health reform law is threatening to swamp U.S. businesses with a flood of new tax paperwork. Section 9006 of the health care bill — just a few lines buried in the 2,409-page document — mandates that beginning in 2012 all companies will have to issue 1099 tax forms not just to contract workers but to any individual or corporation from which they buy more than $600 in goods or services in a tax year.
The stealth change radically alters the nature of 1099s and means businesses will have to issue millions of new tax documents each year. Right now, the IRS Form 1099 is used to document income for individual workers other than wages and salaries. Freelancers receive them each year from their clients, and businesses issue them to the independent contractors they hire. But under the new rules, if a freelance designer buys a new iMac from the Apple Store, they’ll have to send Apple a 1099. A Laundromat that buys soap each week from a local distributor will have to send the supplier a 1099 at the end of the year tallying up their purchases.
The bill makes two key changes to how 1099s are used. First, it expands their scope by using them to track payments not only for services but also for tangible goods. Plus, it requires that 1099s be issued not just to individuals, but also to corporations. Taken together, the two seemingly small changes will require millions of additional forms to be sent out.
This could add up to a pretty heavy administrative burden particularly for small businesses without large in-house accounting staffs. Eliminating the goods exemption could launch an avalanche of paperwork. For example, if you cater a lunch for other businesses once per week, that’s a lot of information to keep track of throughout the year.
The new rules could drastically alter the tax-reporting landscape by spotlighting payments that previously went unreported. Freelancers and other independent operators typically write off stacks of business expenses; having to issue tax paperwork documenting each of them could cut down on fraudulent deductions.
More significantly, the 1099 trail would expose payments to small operators that might now be going unreported. If you buy a computer for your business from a major chain retailer, the seller almost certainly documents the revenue. But if you buy it from Tim’s Computer Shack down the street, Tim might not report and pay taxes on his income from the sale. The IRS estimates that the federal government loses more than $300 billion each year in tax revenue on income that goes unreported. Using 1099s to document millions of transactions that now go untracked is one way to begin to close the gap.
The notion of mailing a tax form to Costco or Staples each year to document purchases may seem absurd to small business owners, but that’s not the worst of it, tax experts say. the bigger headache will be data collection: gathering names and taxpayer identification numbers for every payee and vendor that you do business with.
The final impact of the law won’t be known until the IRS issues its regulations on the new law, which aren’t expected to arrive until sometime next year. The IRS has not yet commented on when it will release regulations or schedule public hearings, and an agency spokesman was unsure when it will do so. The new requirements kick in January 1, 2012.