Another tax question (1099-MISC) (1 Viewer)

superchuck500

guarding the potatoes
VIP Subscribing Member
VIP Contributor
Diamond VIP Contributor
Joined
Aug 9, 2004
Messages
58,573
Reaction score
90,153
Location
Mt. Pleasant, SC
Offline
So I have a side business and I pay consultant fees to a family member.

I need to send a 1099-MISC to her but I'm finding the IRS site very difficult to understand when it comes to 1099-MISC. This should be a simple process, I just need to fill in the relevant info and send the IRS copy in and send her the recipient's copy.

But when you click on the PDF link for the 1099-MISC on irs.gov, it says this:

This form is provided for informational purposes only. Copy A appears in red, similar to the official IRS form. Do not file copy A downloaded from this website. The official printed version of this IRS form is scannable, but the online version of it, printed from this website, is not. A penalty may be imposed for filing forms that can’t be scanned. See part O in the current General Instructions for Certain Information Returns for more information about penalties.

To order official IRS forms, call 1-800-TAX-FORM (1-800-829-3676) or Order Information Returns and Employer Returns Online, and we’ll mail you the scannable forms and other products.
http://www.irs.gov/pub/irs-pdf/f1099msc.pdf

Huh?? I'm having a hard time making sense of this. It appears to be saying that I cannot use a PDF form downloaded from the IRS website, but I must instead order the official form. Is this right? And for heaven's name, what purpose does that serve? Why would they make you go through this charade instead of just using a PDF from their own website? I know you can get other forms from the website.

It seems as if there's a scanning issue with it - but really? What year is this? It's just blowing my mind that I have to actually wait on the U.S. mail or go somewhere to get this form.
 

insidejob

Respect existence or expect resistance.
Approved Blogger
Joined
Feb 3, 2010
Messages
32,296
Reaction score
53,969
Location
Back in 70124
Offline
Not gonna lie, I'd use the pdf from their site just to see what happens.
 

CajunSaint

Hall of Famer
Gold VIP Contributor
Joined
Aug 19, 2001
Messages
7,392
Reaction score
7,842
Location
Metry...Missing Lafayette.
Offline
You can buy the forms from Office Depot. But if you only have 1, just have a professional do it. 1099s are cheap to get done, like $30 or less per 1099.

Also, why are you even giving them a 1099?
 

Beveaux

From The Ridge to the Bay
Joined
Aug 28, 2005
Messages
173
Reaction score
88
Location
God's Country
Offline
Office Depot has an eFile solution. Costs about $18 and you can file up to 5 W-2's and 1099's.

No software. No forms. No printing. No mailing.
 
OP
superchuck500

superchuck500

guarding the potatoes
VIP Subscribing Member
VIP Contributor
Diamond VIP Contributor
Joined
Aug 9, 2004
Messages
58,573
Reaction score
90,153
Location
Mt. Pleasant, SC
Offline
You can buy the forms from Office Depot. But if you only have 1, just have a professional do it. 1099s are cheap to get done, like $30 or less per 1099.

Also, why are you even giving them a 1099?
As I read the rule, I have to send her a 1099 because the company paid her more than $600 this year for consulting services. It was quite a bit more. Is there something I'm missing?

But I just can't see paying somebody $30 to fill out a half-page form with several pieces of information that I would supply the professional. And that's not even to account for the time and effort of coordinating that.

I think IRS is sending me one, I'll know in 7 - 15 days.
 

TXSAINTFAN

Music is Life
Diamond VIP Contributor
Joined
Sep 12, 2005
Messages
7,608
Reaction score
2,740
Location
Edmond OK
Offline
As I read the rule, I have to send her a 1099 because the company paid her more than $600 this year for consulting services. It was quite a bit more. Is there something I'm missing?

But I just can't see paying somebody $30 to fill out a half-page form with several pieces of information that I would supply the professional. And that's not even to account for the time and effort of coordinating that.

I think IRS is sending me one, I'll know in 7 - 15 days.
I believe the insinuation was since it was paid as contract why bother but you are correct over $600.00 is SUPPOSED to be reported. AND if you are taking the payments off your taxes you really need to send that 1099 to back it up.
 

gwballin

Pro-Bowler
Joined
Dec 8, 2009
Messages
825
Reaction score
1,126
Offline
As I read the rule, I have to send her a 1099 because the company paid her more than $600 this year for consulting services. It was quite a bit more. Is there something I'm missing?

But I just can't see paying somebody $30 to fill out a half-page form with several pieces of information that I would supply the professional. And that's not even to account for the time and effort of coordinating that.

I think IRS is sending me one, I'll know in 7 - 15 days.
You're not missing anything. Payments of $600 and more for the year to a noncorporate entity or individual in the course of your business requires you issue them a 1099 and send a copy to the IRS. Make sure you also send the IRS a 1096.
 

CajunSaint

Hall of Famer
Gold VIP Contributor
Joined
Aug 19, 2001
Messages
7,392
Reaction score
7,842
Location
Metry...Missing Lafayette.
Offline
As I read the rule, I have to send her a 1099 because the company paid her more than $600 this year for consulting services. It was quite a bit more. Is there something I'm missing?

But I just can't see paying somebody $30 to fill out a half-page form with several pieces of information that I would supply the professional. And that's not even to account for the time and effort of coordinating that.

I think IRS is sending me one, I'll know in 7 - 15 days.

I dont know the amounts. I was just saying since it is relative, the only way you will get in trouble is if they turn you in or you get audited. BUt if you get audited...depending on the amount, they still likely wouldnt bother you.

But that is bad advice, the rules are what you said.

As for the less than $30, i think spending $30 or less is worth my time to make sure it gets done right...i mean i can go to court and argue my way out of ticket, but paying a Lawyer $100 to make sure it is taken care of is worth my time...just sayin.
 
OP
superchuck500

superchuck500

guarding the potatoes
VIP Subscribing Member
VIP Contributor
Diamond VIP Contributor
Joined
Aug 9, 2004
Messages
58,573
Reaction score
90,153
Location
Mt. Pleasant, SC
Offline
I dont know the amounts. I was just saying since it is relative, the only way you will get in trouble is if they turn you in or you get audited. BUt if you get audited...depending on the amount, they still likely wouldnt bother you.

But that is bad advice, the rules are what you said.

As for the less than $30, i think spending $30 or less is worth my time to make sure it gets done right...i mean i can go to court and argue my way out of ticket, but paying a Lawyer $100 to make sure it is taken care of is worth my time...just sayin.
Fair enough but I don't think that's the right analogy. You wouldn't pay a lawyer to go change your voter registration.

All I have to do is fill in name/address/taxID info and then fill in the amount of non-employee compensation. There were no withholdings or anything like that. It's literally one box.

Another question: I know that I can pay myself (from the LLC to me individually) a small but reasonable amount for tax preparation for the Schedule C. But do I then have to report the same amount as income on my 1040? Is there any reason to do this - as the 1040 income and schedule C income for an LLC are all basically the same thing for tax purposes?
 

CajunSaint

Hall of Famer
Gold VIP Contributor
Joined
Aug 19, 2001
Messages
7,392
Reaction score
7,842
Location
Metry...Missing Lafayette.
Offline
Fair enough but I don't think that's the right analogy. You wouldn't pay a lawyer to go change your voter registration.

All I have to do is fill in name/address/taxID info and then fill in the amount of non-employee compensation. There were no withholdings or anything like that. It's literally one box.

Another question: I know that I can pay myself (from the LLC to me individually) a small but reasonable amount for tax preparation for the Schedule C. But do I then have to report the same amount as income on my 1040? Is there any reason to do this - as the 1040 income and schedule C income for an LLC are all basically the same thing for tax purposes?

Well, first off, is it non-employee compensation or misc income(Box 3)? Because they are or can be taxed differently. I dont know the details of the engagement, but this is where i would say consult your tax advisor. Plus you know you have to fill out form 1096 as well, right? And you know the 1099s are due January 31st?....of course, being a relative, i doubt they whistle blow.

The question to above is yes. SO it makes no sense to pay yourself unless you have another avenue to file that income, like an S or C Corporation.
 

gwballin

Pro-Bowler
Joined
Dec 8, 2009
Messages
825
Reaction score
1,126
Offline
Fair enough but I don't think that's the right analogy. You wouldn't pay a lawyer to go change your voter registration.

All I have to do is fill in name/address/taxID info and then fill in the amount of non-employee compensation. There were no withholdings or anything like that. It's literally one box.

Another question: I know that I can pay myself (from the LLC to me individually) a small but reasonable amount for tax preparation for the Schedule C. But do I then have to report the same amount as income on my 1040? Is there any reason to do this - as the 1040 income and schedule C income for an LLC are all basically the same thing for tax purposes?
Generally single member LLCs are treated as disregarded entities for federal tax purposes which is why you are able meet your compliance obligation by attaching an additional schedule (Sch. C) to your personal income tax return (Form 1040). As such you may not take a deduction for payments made to yourself even for tax return preparation.

However, what may be advantageous for you is to elect for your LLC to be taxed as a corporation and then make the S election so that the earning aren't taxed twice. This will require you to file an additional tax return for the business (1120S) but you then be able to pay yourself a reasonable salary since we are now talking about 2 individual entities (the LLC and you individually) as opposed to 1 taxable entity.

The other benefit of this is that any taxable income the business earns in addition to the reasonable salary you pay yourself will not be subject to self employment taxes. As you currently have it set up, the taxable income on the Sch. C will be subject to the 15.3% tax (half of which you can take as a deduction on page 1 of the 1040).
 
OP
superchuck500

superchuck500

guarding the potatoes
VIP Subscribing Member
VIP Contributor
Diamond VIP Contributor
Joined
Aug 9, 2004
Messages
58,573
Reaction score
90,153
Location
Mt. Pleasant, SC
Offline
Well, first off, is it non-employee compensation or misc income(Box 3)? Because they are or can be taxed differently. I dont know the details of the engagement, but this is where i would say consult your tax advisor. Plus you know you have to fill out form 1096 as well, right? And you know the 1099s are due January 31st?....of course, being a relative, i doubt they whistle blow.

The question to above is yes. SO it makes no sense to pay yourself unless you have another avenue to file that income, like an S or C Corporation.
Thanks for the answer - that's what I thought. Oh well, so much for that deduction.

On the 1099, it's non-employee compensation b/c it was services rendered to the business and she'll need pay SE tax on it. I don't see how it could be misc. income.
 

CajunSaint

Hall of Famer
Gold VIP Contributor
Joined
Aug 19, 2001
Messages
7,392
Reaction score
7,842
Location
Metry...Missing Lafayette.
Offline
Thanks for the answer - that's what I thought. Oh well, so much for that deduction.

On the 1099, it's non-employee compensation b/c it was services rendered to the business and she'll need pay SE tax on it. I don't see how it could be misc. income.

Again, i dont know the scope of the work. Is she in the business of consulting for whatever she is consulting?

You very well may be right, just pointing out that isnt always box 7 that seems to be the default.
 

gwballin

Pro-Bowler
Joined
Dec 8, 2009
Messages
825
Reaction score
1,126
Offline
Well, first off, is it non-employee compensation or misc income(Box 3)? Because they are or can be taxed differently. I dont know the details of the engagement, but this is where i would say consult your tax advisor. Plus you know you have to fill out form 1096 as well, right? And you know the 1099s are due January 31st?....of course, being a relative, i doubt they whistle blow.

The question to above is yes. SO it makes no sense to pay yourself unless you have another avenue to file that income, like an S or C Corporation.
The 1099 is due to the recipient by January 31 but the copy provided to the IRS and the 1096 are not due until February 28.

I would tend to agree with you that since it is a relative, if the 1099 is a little late it likely won't be an issue.
 

gwballin

Pro-Bowler
Joined
Dec 8, 2009
Messages
825
Reaction score
1,126
Offline
Thanks for the answer - that's what I thought. Oh well, so much for that deduction.

On the 1099, it's non-employee compensation b/c it was services rendered to the business and she'll need pay SE tax on it. I don't see how it could be misc. income.
The right answer is that the payment should be reported as nonemployee compensation.

However, even if you were to mistakenly report it in box 3 as other income, it is the responsibility of the recipient to know what the income is for and report it accordingly. Put another way, income reported in box 3 is not excluded from self employment taxes just because it was reported in box 3.
 

Create an account or login to comment

You must be a member in order to leave a comment

Create account

Create an account on our community. It's easy!

Log in

Already have an account? Log in here.

Users Who Are Viewing This Thread (Users: 0, Guests: 1)

 

New Orleans Saints Twitter Feed

 

Headlines

Top Bottom