Do I Need to Issue 1099s to People?

Have you paid anyone over $600 for a service? Then you probably need to issue them a 1099.

Let’s talk about best practices.

BEFORE you pay someone for service — say editing or supervision services — you should request a W-9 from them. A W-9 will include a contractor’s Name/Company name, Address, SSN/EIN, and the type of entity they are.

This information is needed to provide a 1099-Misc to someone if it is required.

But when do you need to issue a 1099-Misc?

When:

  • You’ve paid someone over $600
  • The payment was to an individual or an entity that is not incorporated (Answering this question is why a W-9 is important.)

 

If either of the above cases is true,  filing a form 1099-Misc is required.

What if I Forgot or Didn’t Know to Ask a Service Provider for a W-9?

Ask them for a W-9 now. Doing so as early as possible will give you a head start since 1099-Misc are due January 31st, 2019. That means you have 30 days from the end of the year to file them.

If you do not want to file a 1099-Misc, we are very happy to do so on your behalf. To file your 1099-Miscs, we will need the name and email address of every service provider you’ve hired, as well as the amount paid to them. If you have their W-9s already, we can process them on your behalf.

TL;DR: If you paid someone over $600, you need to get a W-9 from them. Start collecting W-9 forms ahead of time — they’re due to the IRS by January 31st, 2019.

How Does An S-Corporation Save Me Money?

If you have read our post about S-Corporations and determining a reasonable salary, you’re probably wondering how S-Corps help save you money.

Because it’s a requirement to pay yourself a reasonable salary when operating an S-Corp, savings on your taxes comes into play when your reasonable salary is more than your net income. This lets you take a distribution.

Distributions are amounts of cash that you can take out of your business. Distributions are not subject to payroll taxes so by taking a distribution, you save by not paying payroll taxes on that amount of money.

When told about this, most clients ask, “I can just lower my salary then, right?” The answer is: Nope. You are required to have reasonable compensation, which is discussed in the blog post.

After your reasonable compensation is taken care of, you’re good to go to make distributions.

Another big savings item we see is on the health insurance side. If you need to purchase your own health insurance as an S-Corporation, you can purchase it through your business instead of the individual exchange. This often results in you being able to buy better insurance.

However, we do recommend that you talk to an insurance broker before you make any decisions about your health insurance since we do not provide those services.

The last area in which we see savings for our S-Corp clients is when we are putting an accountability and reimbursement plan into place. Depending on your business, we can help you set up a plan to pay for things like your cell phone and mileage. However, this area of savings is very business-specific and depends on the type of business you do.

Should Everyone Be an S-Corporation?

No. An S-Corp is a more complicated form of business that requires you to set up payroll. Becoming an S-Corp also depends on how much money the business is making and your personal tax situation. We have covered some minimums in this post.

TL;DR: Being an S-Corporation can save you money — if you hit the minimum income threshold and set things up correctly.

Cryptocurrencies: Does TL;DR Have Experience With Bitcoin, Ethereum, and Litecoin?

Short answer: Yes, we do.

Long answer: We work with many clients who actively trade cryptocurrencies, mine, or hold onto some form of cryptocurrency. When we discuss cryptocurrencies with potential clients, we ask about the following:

  • Do you keep track of your basis?
  • What exchanges are you currently on?
  • Are you using cryptocurrency as a currency or just investing in it?
  • Are you actively mining?
  • Are you trading cryptocurrency on a regular basis?

 

If you are not keeping track of your basis, we recommend using the website www.bitcoin.tax to manage your portfolio. TL;DR: Accounting has an account on the website so we recommend inviting us to your account as your accountant. From there, we can pull your tax information as needed. This is especially useful if we are helping you with tax planning.

If you would prefer to not set up your own account, we will be glad to do it on your behalf as long as you have the correct imports for the year.

There’s no problem if you use an online service other than bitcoin.tax. In such cases, we’ll need your tax reports, and possibly some additional information, to work with and advise you on your cryptocurrency situation.

Why Should I Use One of the Cryptocurrency Tracking Services?

The biggest reason to use a service like bitcoin.tax is to save time. Pulling and collating information and matching lots sold with lots purchased takes a long time by hand — a fact we discovered in the past, before the advent of these types of online services.

If you are on several exchanges or if you are transferring coin between exchanges for a better service fee rate, we highly highly recommend using one of the tracking services since it’s important to make sure you are not duplicating coin across your reports. You don’t want something to be counted as a sell when it was actually a transfer.

TL;DR: We help folks with taxation and accounting of cryptocurrencies and have people on-staff who also actively trade, mine, and invest in various coin as well. We look forward to helping you.