Have you issued your 1099s for 2015?

After a great discussion in one of my networking groups this morning, I realized that not all small businesses are aware of when they should be issuing 1099-MISC forms to individuals or to other businesses that they have paid throughout the year.  This only applies to payments made in the course of business, not to personal expenses.  The deadline to file these 1099s to your payees is February 1 this year, with the IRS copy due by February 29th, 2016.  There is still time to get these forms prepared, so please reach out to us should you need help with this reporting requirement!

Here are the general rules:

As a business owner, any individuals or LLCs that you pay more than $600 in a calendar year for services should receive a 1099-MISC form from your business. Example: independent contractors such as accountants, your landlord, attorney, office assistants.   As a general rule, you do not need to issue a 1099-MISC to corporations at this time; however, the exemption from reporting payments made to corporations does not apply to payments for legal services. Therefore, you must report attorneys' fees (in box 7) or gross proceeds (in box 14) as described earlier to corporations that provide legal services.  There are other 1099 types, such as for interest payments, forgiveness of debt, etc.  (1099-INT, 1099-C)

It is important to be in compliance with your 1099s, as the penalties for not filing them can be steep, especially for the small business owner.  From IRS:  "If you fail to file a correct information return by the due date and you cannot show reasonable cause, you may be subject to a penalty. The penalty applies if you fail to file timely, you fail to include all information required to be shown on a return, or you include incorrect information on a return. The penalty also applies if you file on paper when you were required to file electronically, you report an incorrect TIN or fail to report a TIN, or you fail to file paper forms that are machine readable. The amount of the penalty is based on when you file the correct information return. The penalty is: $30 per information return if you correctly file within 30 days (by March 30 if the due date is February 28); maximum penalty $250,000 per year ($75,000 for small businesses, defined below)."

To make the reporting process easier, request a W-9 before you issue payments.  That way, you will have your payee name, address, and tax id number easily available come year end when it is time for 1099 reporting.  Using software such as Xero or Quickbooks helps to make determining vendor payment totals for the year easier too!

Help is only a phone call or email away!  Contact Michele Simphoukham at 602-451-7016 or


College expenses and the IRS

September is here and school is now in full swing around the country.  Many post high school students as well as adults are returning to the college campuses.  It is a busy time of getting tuition, fees, and books purchased and starting new routines.  Now that these tuition payments are fresh in your mind, and prior to the end of the year, help yourself by organizing your 2015 education information prior to tax time.  Come January, you should be receiving Form 1098-T from each educational institution attended, which you will need to compute your potential tax credits.

Recently, the IRS is starting to adjust or deny educational tax credits as a result of how colleges and universities are reporting tuition on the annual 1098-T forms.  When you receive a 1098-T with an amount listed in Box 1 for tuition payments received, the IRS is relying on that information and filing is smooth.  However, I am seeing more and more 1098-Ts with an amount in Box 2 for amounts billed for qualified tuition and fees.  When the IRS receives this information, they are then looking to the taxpayer to be able to provide proof of tuition/fee payments by direct payment, loan payments, grants, etc.  Going forward this will need to be provided to the IRS with the filed returns.

Therefore, while this topic is fresh in your mind, take the time to gather the following information for any dependent, yourself, or your spouse that is attending college on a part-time or full-time basis:

  • Statements from the educational institution for any 2015 tuition assessed and detail of your payments made in 2015.  Also include any required fees, books, as some credits allow for these expenses.
  • Separate this information by each student in your household.
  • Indicate if these expenses are for a student in their first four years of college.

May you all have a great start to the fall season!