Wednesday, November 23rd, 2011
I don’t know about you, but the end of the year always gets here before I’m ready for it. And whether we’re ready or not, it will be here anyway, so I try to prepare in December, if not sooner, so I at least have a chance at starting 2012 at an advantage.
1099’s are often overlooked until year end, but the sooner we prepare for them the easier they are to get done once January gets here. The 2011 Schedule C (Profit or Loss from Business for sole proprietors) now has a line item asking: “Did you make any payments in 2011 that would require you to file Form 1099?” While it has always been a requirement to file 1099’s, now the question is being asked on your tax return, and if you answer Yes, the next question is: “Did you or will you file all required Forms 1099?”
If you answered yes to the first part the only answer that works here is Yes. Of course, that means you have to actually have done it, or will do it, or have me do it, or whatever works for you. Otherwise you’re just asking for trouble. There’s a penalty for each 1099 not filed, and last time I checked it was $50 per occurrence.
Whether you’re a sole proprietor, a corporation, an LLC, or a partnership, you’re required to file 1099’s.
Amounts to Report
$600 or more, unless it’s for royalties, which is $10 or more.
Who gets a 1099?
The following are the biggest categories to be aware of:
Nonemployee compensation (subcontractors), unless they’re incorporated
Rental income (yes, you must send your landlord a 1099)
Mileage, nonemployee
Auto reimbursements, nonemployee
Attorney fees and gross proceeds (any amount)
Car expenses, nonemployee
There are more but those are the major ones that might apply to you.
When to Report
1099’s are due to the IRS by February 28th, and to the recipients by January 31st.
If you’ve paid someone more than $600 this year, you’ll want to make sure they’ve provided a W-9 to you, or have provided their EIN. If you’ve paid more than $600 and don’t have a W-9 yet, get it before the end of the year so you’re ready.
If they refuse to provide a W-9, give them no more payments. And in the future, don’t pay anyone without getting a W-9 first, just in case, even if you don’t anticipate paying them more than $600 in a year.
If you’ve made payments and are unable to get the EIN info from the payee, give me a call. I’ll tell you the best way to handle it.
Here’s a link to the W-9 form: http://www.irs.gov/pub/irs-pdf/fw9.pdf
Friday, November 11th, 2011
If your business has grown enough that you’re pulling your hair out trying to do your own books, you may be wondering what your next step is. There comes a time when you realize that by doing it all yourself, you’re shortchanging your business by not devoting yourself to what you do best.
But before hiring anyone, the first thing you want to do is figure out what you want. Do you want someone on-site, or will you be happy with an independent bookkeeper who works at their own office? Much of that will depend on your business and the tasks you need your bookkeeper to perform. If you need someone in the office, you’ll want to consider an employee.
First, make a list of what you need your bookkeeper to do. List specific tasks, such as pay bills, answer the phone, payroll, invoicing.
Next, do you have space in your business for a bookkeeper? You’ll need a desk, a computer, an ergonomic chair, and Internet. You’ll need accounting software, and you’ll need file cabinets.
Consider how many hours a week you need a bookkeeper. Maybe part-time would work just fine for you. Maybe just a few hours a week. If so, would you be better off with an independent bookkeeper who won’t be on payroll?
If you’re set on hiring an employee, make sure you have a list of the job requirements, the hours you need them, the pay structure, any benefits you can offer, and your expectations. Once you have all that, you can advertise, but you want to make sure you know what you want before the resumes start rolling in.
If you’re not sure if you need an in-house bookkeeper or not, an independent can help you make that decision. We can talk to you about your needs, show you what we can do, and explain your options. Some of us will even help you hire an in-house bookkeeper if that’s what you need. We can provide tests to ensure they have the knowledge they claim to have, and we can oversee their work if you want that extra bit of security.
Not sure if you can afford an independent? Our rates are higher than an employee, after all. But that’s because you’re paying for our expertise, not our data entry skills. Also, you don’t have overhead, taxes, benefits, and days off to pay for. You pay us for results, not for the time spent sitting in the office. Many people start out with an independent until they grow enough to need someone in-house.
Whether an in-house bookkeeper or an independent is best for you is a determination that only you can make. Some independents will work on-site, and some won’t. A hybrid like this may suit you – someone in the office but not on payroll. However, as a contractor it won’t be up to you what hours they work, and they shouldn’t work under your direction, but independently. If you tell them when to work and how to work, that’s an employee, and you’d best hire an employee to avoid problems with the state and IRS.
Other considerations include how many current employees you have, how many employees you anticipate having in the future, expected growth of your company, how much time you want to spend on your accounting, how much training time will be needed and who will do it, and what will make you feel the most secure. When you have anyone else working on the books it’s important to maintain enough control so you know what expenditures are being made, and why. No matter who is doing the books, you as the owner must have a clear view of your operations and processes in place to avoid any internal control issues.
Keep in mind that whoever you have doing your books will know everything about your business, and you need to be open with them, and they with you. Find someone you’re comfortable with, whether it’s an employee or an independent contractor. A good bookkeeper will help you grow your business, and help make your life easier.
