Freelancers to issue Apple a 1099 form if purchasing a Mac!

[GroundLoop]

Don't want to make this political....more of a heads-up since there are many freelancers on these forums...

If you make purchases of $600 or more from any company...you will need to issue them a 1099 to document those purchases.

http://money.cnn.com/2010/05/05/smal...change/?hpt=C2

Tax law really is getting crazy...

Hickman

ps - mod feel free to move this if it does get too political in here...

[miles01110]

Well since corporations are people too, I don't see what the big deal is

[GroundLoop]

Originally Posted by miles01110

Well since corporations are people too, I don't see what the big deal is

Could you imagine the extra overhead though...issuing 1099s to...

Apple
Staples
Costco
Every restaurant that you hold a business meeting


Before you could just write it off as a business expense and keep the receipts in case of an audit.

Now you need to collect a ton of info on these companies and issue tax documents.

It is nuts.

Hickman

[miles01110]

If there's one thing governments are good at, it's generating more paperwork than can ever be useful.

[velocityg4]

Originally Posted by Brian Hickman

Could you imagine the extra overhead though...issuing 1099s to...

Apple
Staples
Costco
Every restaurant that you hold a business meeting


Before you could just write it off as a business expense and keep the receipts in case of an audit.

Now you need to collect a ton of info on these companies and issue tax documents.

It is nuts.

Hickman

How about the overhead on their end. Just think of all the 1099's Dell, Amazon &c will be filling out for every business that has made over $600 in purchases during the tax year. Plus the utter confusion. Take Amazon for example, do you send the 1099 request to just Amazon or the individual sellers selling through Amazon? If through each individual seller then you must scrutinize every receipt to find the party to request a 1099 from.

On a positive note this will make for great job security for accountants. Their wages will also go through the roof as the demand for accountants will quickly exhaust the supply. This will probably lure many out of retirement too.

[Mousse]

Originally Posted by Brian Hickman

Don't want to make this political....more of a heads-up since there are many freelancers on these forums...

If you make purchases of $600 or more from any company...you will need to issue them a 1099 to document those purchases.

Sonova--!!! This is gonna break the backs of a lot of small businesses, most of which have a problem with short staff. (Hire taller staff. *rim shot drum roll*) This is going to add hundreds of hours to my workload and cut into my MR time. **** Big Gub'ment.

[QuantumLo0p]

This is precisely why a flat tax could be so much better than our current system. I know our system is enormously complex but even a flatter tax than what we have now would be a huge improvement.

Just think, rather than hiring 16,000 more IRS workers we cut back on them, reduce government, simplify the tax code, increase compliance and save taxpayers enormous amounts of money that is would have been wasted on pure overhead.

[Rodimus Prime]

Originally Posted by QuantumLo0p

This is precisely why a flat tax could be so much better than our current system. I know our system is enormously complex but even a flatter tax than what we have now would be a huge improvement.

Just think, rather than hiring 16,000 more IRS workers we cut back on them, reduce government, simplify the tax code, increase compliance and save taxpayers enormous amounts of money that is would have been wasted on pure overhead.

Flat tax would do nothing in this issue. You can not flat tax revenue. You can only flat tax profits. Business expenses are reduce the amount of profit a company makes.

[snberk103]

Originally Posted by QuantumLo0p

This is precisely why a flat tax could be so much better than our current system. I know our system is enormously complex but even a flatter tax than what we have now would be a huge improvement.

Just think, rather than hiring 16,000 more IRS workers we cut back on them, reduce government, simplify the tax code, increase compliance and save taxpayers enormous amounts of money that is would have been wasted on pure overhead.

Better way would be to take away the taxing authority of every town, village, county, and city. If only the Feds and the States had taxing rights, then there would be just over 50 tax codes for any business to deal with, instead of the current thousands and thousands.

Canada has a Federal VAT, and then the provinces can tack on a Provincial sales tax - or combine the their PST into the GST. Means that company that sells across the country has to deal with a dozen tax codes as most. Opening up a single branch plant in one state in the USA might mean dealing with an additional 4 tax codes for just one location (County, City, State, Federal).

Regarding the 1099. Its a pain, and the government is going to drown in pieces of paper. But if you use a computerized bookkeeping system it shouldn't pose any problems for freelancers.

All you have to do is enter a vendor's complete info just once (probably from the receipt), and at the end of the year print out a report. I can see the bookkeeping software people adding a report format that meets IRS guidelines.

The big stores are ones who are going to have to staff the phone lines at tax time to deal with businesses calling to get the last minute info.

I would have thought that if the IRS had spent half the money and used that to hire more auditors, and then just increased the the number of returns it reviews the pay back would have been greater. But, oh well.....

[Chip NoVaMac]

Originally Posted by Brian Hickman

Could you imagine the extra overhead though...issuing 1099s to...

Apple
Staples
Costco
Every restaurant that you hold a business meeting


Before you could just write it off as a business expense and keep the receipts in case of an audit.

Now you need to collect a ton of info on these companies and issue tax documents.

It is nuts.

Hickman

But it covers purchases only over $600 dollars....

And audits are not as common as you think...

[GroundLoop]

Originally Posted by Chip NoVaMac

But it covers purchases only over $600 dollars....

And audits are not as common as you think...

I foresee them becoming quite a bit more common. If it was single purchases it would be much more bearable, but it is $600 in total purchases during the tax year. So you need to monitor every purchase with every company. This isn't so bad for big companies, but small businesses are going to drown in the paperwork.

I didn't dive too deep, but I wonder how it works is you buy more than $200 of goods/services from three companies with the same parent corporation. I suppose it just goes by tax IDs and not company names.

This is just way too sticky.

Hickman

[mags631]

Originally Posted by Brian Hickman

I foresee them becoming quite a bit more common. If it was single purchases it would be much more bearable, but it is $600 in total purchases during the tax year. So you need to monitor every purchase with every company. This isn't so bad for big companies, but small businesses are going to drown in the paperwork.

I didn't dive too deep, but I wonder how it works is you buy more than $200 of goods/services from three companies with the same parent corporation. I suppose it just goes by tax IDs and not company names.

This is just way too sticky.

Hickman

I think this is too onerous. However, can't this be relatively easily tracked in something like QuickBooks?

[Rt&Dzine]

Originally Posted by Brian Hickman

I foresee them becoming quite a bit more common. If it was single purchases it would be much more bearable, but it is $600 in total purchases during the tax year. So you need to monitor every purchase with every company. This isn't so bad for big companies, but small businesses are going to drown in the paperwork.

I didn't dive too deep, but I wonder how it works is you buy more than $200 of goods/services from three companies with the same parent corporation. I suppose it just goes by tax IDs and not company names.

This is just way too sticky.

Hickman

This could be a pain. I'll have to remember if I'm debating some big purchases around that time, to make them before 2012 to forestall the extra hassle.

[JLatte]

The small businesses are really going to have to be careful to keep track of all their purchases.

[snberk103]

Originally Posted by mags631

I think this is too onerous. However, can't this be relatively easily tracked in something like QuickBooks?

Doesn't really concern me, as I'm not in the US - but I agree with your thinking. I have a different bookkeeping package than QuickBooks.... and I know it could kick out all the reports I would need for this. If small business people are keeping the records they should be keeping, then this requirement is a small extra burden. I agree that it is an extra burden that doesn't seem necessary at all, but it should not too difficult to work with.... if the business records are as organized as they should be.

[ChrisA]

Originally Posted by QuantumLo0p

This is precisely why a flat tax could be so much better than our current system. I know our system is enormously complex but even a flatter tax than what we have now would be a huge improvement.

Just think, rather than hiring 16,000 more IRS workers we cut back on them, reduce government, simplify the tax code, increase compliance and save taxpayers enormous amounts of money that is would have been wasted on pure overhead.

Every four years I run for president on the "common sense" party. One of my proposals is to run the government on what I call the "restaurant tax". What we's do is simply divide the total bill by the number of people. So, let's say the government spends $3T and there are 250M people and you are the head of a household of four. Your share is about $48,000. You simply write a $48,000 check and mail it off. In the restaurant we don't say "how much money did you make last year" no, we just split the check. If you don't like the bill go some place where the bill is less.

Also we can prevent crime only if we lock up the criminals BEFORE that commit the crime. catching the guy after the fact does not un-do a shooting.

My health care reform ideas was already done. I said the only way to make sure everyone is insured is to pass a law saying that everyone must have insurance. I'd go one more step and stay that if you can't pay and did not buy the insurance you are simply left to die. No free rides.

That said, I've yet to get a vote.

[Rodimus Prime]

Originally Posted by ChrisA

Every four years I run for president on the "common sense" party. One of my proposals is to run the government on what I call the "restaurant tax". What we's do is simply divide the total bill by the number of people. So, let's say the government spends $3T and there are 250M people and you are the head of a household of four. Your share is about $48,000. You simply write a $48,000 check and mail it off. In the restaurant we don't say "how much money did you make last year" no, we just split the check. If you don't like the bill go some place where the bill is less.

Also we can prevent crime only if we lock up the criminals BEFORE that commit the crime. catching the guy after the fact does not un-do a shooting.

My health care reform ideas was already done. I said the only way to make sure everyone is insured is to pass a law saying that everyone must have insurance. I'd go one more step and stay that if you can't pay and did not buy the insurance you are simply left to die. No free rides.

That said, I've yet to get a vote.

I am just going to assume you are joking in your response.

But lets assume you are not for a seconded. What about the families that do not make 48k a year. That is more than a lot of entire family earn in a year.

[Chip NoVaMac]

Originally Posted by Rodimus Prime

I am just going to assume you are joking in your response.

But lets assume you are not for a seconded. What about the families that do not make 48k a year. That is more than a lot of entire family earn in a year.

Just happy he hasn't won yet

[Macky-Mac]

i predict that a whole lot of 1099 forms aren't going to be file....actually a whole lot of 1099 forms aren't filed currently, but that's a different story

[Eraserhead]

Originally Posted by ChrisA

That said, I've yet to get a vote.

If this was implemented there would be a riot in DC over this.

[rhsgolfer33]

This new law is pretty crazy and really lacks any point under current tax structure. Why does the Apple, for instance, need a 1099 if a freelancer makes a purchase there? Its not like the government could ever review all of those 1099's in an audit and randomly sampling from 200,000 1099's isn't going to be too cost effective either. There isn't much incentive for a large business like Apple to underreport sales or revenue; when it comes to revenue, investors tend to like larger numbers, not smaller ones.

To me, this just further solidifies my belief that our lawmakers don't read or don't understand most of what they pass. Either that or they're already starting to law the groundwork for a VAT, which is probably fairly likely as well.

The good news is that, as someone entering the accounting profession, many smaller business will want someone to prepare these 1099s for them, which means more income for those who choose to work with smaller clients.

Originally Posted by mags631

I think this is too onerous. However, can't this be relatively easily tracked in something like QuickBooks?

Not currently, though Quickbooks does track purchases by vendor, you'd have to manually do the 1099s currently. 1099s have never been used to track purchases of goods; they're currently used for certain income other than wages and salary. This is a fairly significant change.

Quickbooks would have to been changed to produce the 1099s automatically (which probably wouldn't be too difficult), but it likely could do it. Its not really a small business that would have the larger problem; midsize and larger companies with a large number of suppliers and purchases greater than $600 will be the ones issuing the brunt of 1099s. Though this could increase a small businesses 1099s from 40-50 to 200-300 depending on how many vendors they use.

[Chip NoVaMac]

The key in this new law is reporting of unearned income.. and based on the Congress this is a loophole that needs to be closed. Not a problem for larger companies. I have gotten 1099's for "prizes" I have won at work.

The issue is dealing with small businesses that try to operate under the "radar" of IRS rules. Even under the new rules it is possible for a small business to take a $1300 purchase and break it up in a way to skirt the $600 rule.

More the reason for the US to look at a VAT tax IMHO...

Many of us IMHO play it clean with the likes of Turbo Tax each year... and too many more play the "game" to get more back....

Do we want to end up like Greece?

[rhsgolfer33]

Originally Posted by Chip NoVaMac

The key in this new law is reporting of unearned income.. and based on the Congress this is a loophole that needs to be closed. Not a problem for larger companies. I have gotten 1099's for "prizes" I have won at work.

Plenty of unearned income is already reported via variants of the basic 1099. The new law has nothing to do with reporting unearned income; its about reporting purchases of goods made by companies. A sale of goods isn't unearned income, its sale (ie revenue) and in most cases already shows up on line 1a of a corporation's IRS form 1120. This seems to be the one of the first steps needed to implement a VAT.

Originally Posted by Chip NoVaMac

The issue is dealing with small businesses that try to operate under the "radar" of IRS rules. Even under the new rules it is possible for a small business to take a $1300 purchase and break it up in a way to skirt the $600 rule.

Source? CNN's analysis says that if you purchase more than $600 total from a company in a tax year you will have to issue that company a 1099. This involves a large amount of work on the part of a company and/or its accountants. Admittedly, this is CNN's analysis, but if you've got other information about breaking this up to avoid the $600 rule without doing something crazy like setting up separate companies to make the purchases, I'd love to read it.

Originally Posted by Chip NoVaMac

More the reason for the US to look at a VAT tax IMHO...

I don't think setting up a VAT is the solution, especially in a down economy. Its very regressive and certainly doesn't encourage consumer spending since it gives the illusion of an increased price level (which usually would lead to decreased demand and consumer spending in an economy).

Originally Posted by Chip NoVaMac

Many of us IMHO play it clean with the likes of Turbo Tax each year... and too many more play the "game" to get more back....

Oh give me a break; tax avoidance is perfectly legal, tax evasion isn't. Using methods available, like a tax professional, who have more advanced knowledge of the codes enacted by the IRS than TurboTax, in order find and to pay your minimum tax liability isn't playing a "game," its simply obeying the law to the letter. Finding you're minimum tax liability isn't some sort of bad thing, its a good personal financial decision.

Originally Posted by Chip NoVaMac

Do we want to end up like Greece?

We're not going to end up like Greece because of a few tax cheats, we're going to end up like Greece because of incompetent leaders who refuse to raise taxes for all using well thought out tax policy measures and refuse to decrease the shocking amount of government spending (especially on nonsensical wars). Unlike Greece, our tax policies are already fairly well enforced (even if I disagree with some of them; see numerous types of estate taxation).


Here is a wonderful summary from a tax attorney regarding these new requirements.

[Eraserhead]

Originally Posted by rhsgolfer33

Plenty of unearned income is already reported via variants of the basic 1099. The new law has nothing to do with reporting unearned income; its about reporting purchases of goods made by companies.

Quite, this seems to be ridiculous.

Originally Posted by rhsgolfer33

We're not going to end up like Greece because of a few tax cheats, we're going to end up like Greece because of incompetent leaders who refuse to raise taxes for all using well thought out tax policy measures and refuse to decrease the shocking amount of government spending (especially on nonsensical wars).

And they also don't seem to be able to get big legislation through, I mean lets face it Obama and Bush's governments didn't/haven't really make that many good changes.

Things like the US healthcare bill which isn't that much of a step forward make "classic" British compromises like our introduction of civil partnerships (with the same rights as marriage) look incredibly ballsy by comparison.

[Eraserhead]

Originally Posted by rhsgolfer33

I don't think setting up a VAT is the solution, especially in a down economy. Its very regressive and certainly doesn't encourage consumer spending since it gives the illusion of an increased price level (which usually would lead to decreased demand and consumer spending in an economy).

Wouldn't that be a step forward for the US?