Piano World Home Page Forums Our Most Popular Forums Piano Teachers Forum New USA tax reporting requirement

Are you still thinking that you'd have to report stuff like your washer/dryer purchase?

If retail coin sales have to be reported, which are not business to business, then it's possible all large consumer purchases may have to be reported. I haven't downloaded the final bill, and don't have time to dig further. Hopefully, there will be enough hue and cry over this that it gets dropped in its entirety.

Hmm... I just spent a half hour googling, and I think the new law DOES cover retail purchases, not just business to business. Yikes. It's worse than I thought.

I think John's washer/dryer purchase wouldn't be included, though... I think the new regs apply only to business-related purchases and sales. So unless John diversifies by offering to do students' laundry during their lessons, he's safe.

Well, a number of the referenced articles goes back as much as a full month before.

For our understanding, could you articulate for us what you see as "the implications for piano teachers" in terms of time and effort and any other relevant considerations based on the understanding that you gained from the CNBC report?

[Edit: I got part of this wrong and am deleting in the interest of not spreading more misinformation.]

The average piano teacher probably would be filling out far fewer 1099s than the typical small business, but if it really takes 20-30 min. to do each form, it can add up in time and hassle.

Not likely! Do you think grocery stores will be required to get W9s from all of their customers in case they spend $600 a year?

I listed several types of expenditures in my initial post. This past year, I purchased a new hand-held recorder. It would require reporting. I purchased a new microphone for my studio's camcorder, so students could have better audio on their take home DVDs; It would require reporting. I purchased a new computer for my studio's office; it would require reporting. One other piece of equipment I purchased for my studio was a new zoom lens which came in just over the reporting $ limit. I like to take snaps of my students at various events so I can post them in the studio. That would require reporting.

I'm just a one man operation and immediately, I see six or more hours of additional work and for what? So some bureaucrat can justify his desk job in Washington?

Oops, I forgot, I purchase some adjustable benches for students (at discount) so that, too, would require reporting.

Of course, I itemize these purchases on Schedule C, but preparing 1099s looks like it's going to be a boat load of additional work.

Expect a lot of $599 purchases in the coming year

Ya think the IRS will be able to adequately and efficiently process all of this additional paperwork, even with more folks hired there?

You're right, BDB, and I was/am confused. Fortunately, after spending WAY too much time googling, I finally found a blog that links to the actual tax code being affected:

Sec. 6041. Information at source

(a) Payments of $600 or more
All persons engaged in a trade or business and making payment in the course of such trade or business to another person, of rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits, and income (other than payments to which section 6042(a)(1), 6044(a)(1), 6047(e), 6049(a), or 6050N(a) applies, and other than payments with respect to which a statement is required under the authority of section 6042(a)(2), 6044(a)(2), or 6045), or $600 or more in any taxable year, or, in the case of such payments made by the United States, the officers or employees of the United States having information as to such payments and required to make returns in regard thereto by the regulations hereinafter provided for, shall render a true and accurate return to the Secretary, under such regulations and in such form and manner and to such extent as may be prescribed by the Secretary, setting forth the amount of such gains, profits, and income, and the name and address of the recipient of such payment.

The new laws make the following changes to that code:

SEC. 9006. EXPANSION OF INFORMATION REPORTING REQUIREMENTS.

(a) INGENERAL.—Section 6041 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsections:

(h) APPLICATION TO CORPORATIONS.—Notwithstanding any regulation prescribed by the Secretary before the date of the enactment of this subsection, for purposes of this section the term ‘person’ includes any corporation that is not an organization exempt from tax under section 501(a).

(i) REGULATIONS.—The Secretary may prescribe such regulations and other guidance as may be appropriate or necessary to carry out the purposes of this section, including rules to prevent duplicative reporting of transactions.’’.

(b) PAYMENTS FOR PROPERTY AND OTHER GROSS PROCEEDS.—
Subsection (a) of section 6041 of the Internal Revenue Code of 1986 is amended—

(1) by inserting ‘‘amounts in consideration for property,’’ after ‘‘wages,’’,

(2) by inserting ‘‘gross proceeds,’’ after ‘‘emoluments, or other’’, and

(3) by inserting ‘‘gross proceeds,’’ after ‘‘setting forth the amount of such’’.

(c) EFFECTIVE DATE.—The amendments made by this section shall apply to payments made after December 31, 2011.

There. That clears everything up, doesn't it?

Well, presumably you are not buying new benches, a new computer and new recorders and cameras and zoom lenses every year, so in your case and in the case of 99% of solo piano teachers the amount of transactions would seem to be tiny indeed on average every year. If you are buying new ones each year, that might be an explanation why you are earning less from your business than you want. You might buy $600 worth of tuning for which you might already prepare a form for in addition to perhaps $600 of recital hall/catering costs or office supply costs or sheet music costs at one vendor. I am at a loss to think of anything else and apparently you are too.

And, for these items you mentioned you are already required to keep receipts for, be able to demonstrate need for your business, verify that they are tax deductible business expenses, show that you are not using them for personal use and in some cases only deduct an amount for depreciation per year above a tolerance amount and up to a certain maximum instead of the whole purchase amount in the year of purchase. So, already you must completely account for them as a professional, responsible, independent businessman.

Most small business people, even one-man contracting companies, use some kind of online banking or PC or internet based method of recording and documenting these purchases to prepare their own taxes or to provide the details to their accountant. If you don't now, then now is a good time as any to actually start easily and efficiently meeting one's duties and taking care of one's professional obligations using low cost or free tools widely available today, regardless of any 1099 reporting requirements.

None of us know what the requirements or process will be in 2012 since that has yet to be determined. However, if the US follows the lead of other countries in this area, the reporting will be automated either transmitting the data electronically automatically from your accounting records or allowing you or your bookkeeper/accountant to enter them easily online for electronic transfer. If the forms must be produced on paper, the software will also be able to print them automatically at the end of the year.

So, in the worst case we are looking at perhaps a maximum of one or two more hours of your time per year above the normal, everyday bookkeeping requirements that you must already meet today to avoid breaking the law or neglecting your professional business duties to prepare a couple of forms.

Someone in Washington with a desk job won't have to spend a second on it, since the process is automated (it is the year 2010 after all). So, the extra cost and effort is minimal for you or the country, but the ability in aggregate to start clawing back some of those hundreds of billions of stolen tax receipts is greatly enhanced.

Your worries sound like a tempest in a teacup to me.

If one of my piano students told me after I asked them to do one or two more hours work for me spread out during the course of an entire year's work of lessons -- or even six hours of additional work over a course of a year -- that "it's going to be a boatload of additional work" that "really hits hard", "saddling him up with minutiae" and "a big nuisance" and "totally invasive and unnecessary" and then threatening to quit (retire) in frustration because of this travesty, I would, besides the difficulty of trying to keep a straight face and not break out in a giggle, probably not be able to take him too seriously. I would certainly question his commitment and judgement.

When I have my accountant do my taxes (they are way too complicated for me to do them, even though I have a lot of accounting and tax experience), I give him the totals from my computer programs in Quickbooks and Quicken, which have tallied up all my purchases and categorized them as I entered them. I then tell my accountant that I had $XXX.XX in expenses for office supplies, $XXX.XX in professional development costs, etc. I do not give him the name, address and tax id itemization of each. I would have to enter that information in for every purchase made, then provide that itemized list. There is a list you can print from Quickbooks I believe for 1099 vendors. So now I have to pay my accountant to go through and produce all of these 1099s, when normally I'd only need one! I'm not sure what it will cost me, but already I pay a hefty sum for taxes since we have an s-corp in addition to my teaching business and two rental properties. With my husband's business, he *does* buy equipment every year and so many things would qualify to report 1099s on.

This is the problem. And I do keep my receipts and am very diligent about entering information into Quickbooks and Quicken. The point is, why add this burden? How and who is this helping? If people want to evade taxes, then they will do so. Does that make it OK to add more work for those who actually spend the time to do the right thing in the first place?

It doesn't sound like you will have much additional burden at all. Entering 20 or 30 vendors once in quicken and then also selecting a vendor field on maybe 100 transactions per year will take a few extra minutes per year. Maybe you will need to make 2 or 3 or at worse 6-10 1099s (likely automatically).

As you know, being an independent business person brings certain adult responsibilities with it including accounting and bookkeeping. If you were to take a job at Wal*Mart you would not have to do that, but Wal*Mart will be doing it for you. The same if you go to work as a music teacher at your local school system.

I sympathize with you that you live under a very complex, backwards and inefficient tax regime and that there are not free tools today made available to easily do your own taxes without paying for an accountant. However, short of moving to another country, getting a job instead of being your own boss or voting for progressive changes to the status quo, that is the reality you have to deal with. It could be worse, you could be trying to run your studio in Somalia or somewhere where your daily worries are how to get clean water and avoid being shot on the street on your way to the market.

Journey, you're rationalizing.

There is no real solid reason to saddle millions of honest tax payers and small business people with this additional reporting requirement.

Regardless of what you might think, not all businesses are constructed fully automated. Twenty-five odd years ago, when PCs were in their infancy, I began working on spread sheets to maintain my accounts. I have never transitioned to Quick Books, or other programs, mainly because even today, they do not do billing the way I want to do billing. I'd have to spend $$$ to purchase specialized software to handle tuition billing and why reinvent the wheel.

My point in starting this thread was to let teachers know that there is a major headache coming our way, and to be ready for it. Of course, I'm going to encourage my Congressman to vote to repeal it, and hopefully, millions of angry voters will persuade Congress to do something about it.

As for my studio expenses, I offer my students a quality music education, which includes modern and up to date equipment. If you wish to teach on an out of tune clunker of a piano, in a dimly lit room, fine. Don't saddle the rest of us with this tightwad approach.

OK. I get it.

You have completely unique and specialized requirements for recording your 10 or 12 different kinds of expenses each year that no one else understands and that would require spending a fortune on specialized software to meet your needs. What other people can easily do in minutes will take you hours and hours of pain and torture. Spending an hour or two yping out 3 or 4 1099s from the totals on your spreadsheets will be like losing your liberty as a free American and is good reason to retire from teaching.

I have it figured out. You want to make up stuff and whine and have an ideologically motivated emotional rant while avoiding a rational discussion. I understand. Sorry I tried to shine sun on your rainy parade! I wish you a nice adrenaline rush. Think of your heart.

It hardly seems like a "major headache" to me.

I'm getting a headache just trying to figure out what the code says in Monica's post!

This is not a major change. You have been required to do this reporting for some businesses for a long time. The change is that you might be required to do it for more businesses.

Thanks, Monica. Time to kill all the lawyers!

To the best of my knowledge, piano teachers have not been required to submit form 1099s to the IRS on our purchases of $600 or more. Or for any purchase of any amount.