In a previous E-Note, we advised you that the IRS was sending out notices to small businesses questioning the possible under-reporting of income. The IRS did, in fact do this, as the result of matching the information reported on the 2011 Form 1099-K that was reported, to the income the business reported on its tax return. If you received a notice, or would like more information about the IRS notice pertaining to 1099-K forms, click here.
If you have not received one of these notices, you are still not out of the woods. If you remember in our previous blog post on 1/17/12, merchant service payment processors, including PayPal, will be required to withhold 28% on received funds for any customer that has not provided a correct Tax Identification Number by 12/31/12. This requirement is already in place, and the withholding requirement delayed for payments through 12/31/12. Be sure to provide a Form W-9 to your merchant service providers by 12/31/12, to avoid a 28% back up withholding on funds received from one of these third parties. In addition, be sure that you include all merchant service income in your total income on your tax return. The links to our previous blog post and to a fill-able W-9 PDF are included for your convenience.
We would also like to add the IRS FAQ link on the subject, and inform you about our December newsletter (delivered to our subscribers and posted to our website on 12/11/12), which is chock full of 1099 reporting information:
- How to correctly report 1099-MISC income, both paid to vendors and received from customers/clients
- A workaround in QuickBooks to report the correct amount on 1099-MISC forms
- Penalties for filing late or failure to file a required Form 1099-MISC
- Who is subject to receive a 1099-MISC forms overview
Disclaimer: This post is intended to provide general information about the subjects posted. It should no way be construed as tax or financial advisement. We do not endorse any website or product introduced here. Please contact Seacoast Accountability, a CPA, or a tax professional to discuss your particular tax or financial situation.