Sometimes It’s the Little Things That Come Back to Bite You

Since they are only done once a year, the little things regarding the tax code are often overlooked or forgotten.  In some cases, this can lead to unintended penalties and fines.  As a sole proprietor, it’s not enough to just include a Schedule C on your personal tax return.  Before January 31st, you must remember to complete and send 1099-MISC forms to anyone you paid more than $650 to last year, and transmit copies of those forms to an IRS office.  But where do you get 1099-MISC forms and what information has to go on them?  Among other things, you need to include the payee’s Social Security number and address.  That’s the first problem.  For many people that you might hire, such as a carpenter, a plumber or others, to do an outsourced one-time job, you may not have thought about needing their personal contact information at that time.  Hopefully, if you didn’t gather it then, you can reach out to them now and they’ll cooperate.  Unfortunately, many of these people can be mysteriously hard to reach this time of year.  But it is still your responsibility to fill out a 1099-MISC that includes their name, address and amount paid to them for the previous year.  You must send them a copy for their income taxes and a copy, with a transmittal form, to the IRS.  This requirement is often overlooked by small business owners, especially those who do not employ an accountant, which later turns into a failure to file penalty for each occurrence.  Where do you get these forms?  They are readily available online, but not for free.  Every free 1099-MISC provider that we found has some gimmick.  You have to download their app and/or sign into something and enter some of your personal information in order to access the forms, and then, of course, they are going to sell your data.  Nothing is free.  Those forms have a cost.  That cost may not be monetary, but it may be the selling of your data to third parties, often without you knowing, who will then start trying to sell you their goods or services.  You can also go to major retailers like Staples or Office Max, where office equipment is sold.  They frequently have kiosks, where you end up paying $30, $40 or $50 to get 20 sets of forms, when you only need one.  So again, the online version may be “free” but you’re going to have to give up some of your information and likely receive solicitations.  That may or may not be more annoying than parting with $40 for the sake of getting one set of forms.  In any case, they’re there, they’re available, go get them.  Chase down everyone that you paid, if you don’t already have their Social Security number and address, and get the forms filed.  Then, add up all of those independent 1099s for a total, fill out a transmittal form and get that into the IRS ASAP.  You only have a few more days to get it done.

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