What's Up With...?

After watching a very interesting episode of the Tyra Banks show yesterday (allow me to digress, I typically am not a fan) but she had a panel of doctors on her show answering questions regarding medical ailments for women. I did learn a couple of things, of which I am always grateful. It gave me an idea, how about my own segment of What's Up With....?

So here I will pose a few questions regarding financial statements, taxes and banking that always seem to come up.
Question: Why do I need to file a 1099?
Answer: Hmmm. If I tell you because Uncle Sam says so, will that work? :) No? Okay then. You have to file a 1099 on businesses, contractors or individuals that received more than $600 in that calendar year. The exception to this rule is Corporations. Corporate entities do not receive a 1099. If you do not send out these fun forms, you could be facing penalties along with the possibility you could be responsible for the contractors taxes due. Yes, you heard me correctly. If you purposefully do not send out 1099 statements, you could pay someone else's taxes. Not worth it in my opinion. Now I have several clients that are worried that the contractor will raise rates if they are 1099'd. I say lose them and find a reputable contractor that abides by the law.
IRS Website

Question: Is my new contractor considered an independent contractor or an employee?
Answer: This is a tricky one. One where you are fighting both state and federal guidelines. Here is what Uncle Sam as to say in whether or not your "employee" is an independent contractor or employee. CLICK HERE Now that you have determined whether or not this individual is an IC or Employee you can rest easy knowing you are within the law. Having the responsibilities of employees can be both financially and mentally frustrating. The cost is significantly higher, the reports are no fun to file, and payroll can be a bear. But word of advice friends, Uncle Sam and Mr. Stateman is coming down hard on this subject.

Question: I am wanting to start a new business but I have no idea where to begin. Can you help?
Answer: Lee & Associates is more than glad to help you setup your new business books and get you started. We do not, however, provide legal or accounting services that directly concern business entity creation. I recommend you find a reputable CPA in your area. Preferably one who specializes in your industry. The larger tax service companies are good for one thing, filing taxes. Business entity strategy, financial planning, and legal services are NOT their specialties. Once you are ready to setup your business, legalzoom.com is a great website to setup your business. Also, make sure you understand how your business entity will be taxed on both state and federal sides. You do not want to get a surprise from Mr. Stateman next year.