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I remember in Aust. when the GST came in and then the BAS and quarterly tax reporting requirements were implemented - small businesses here ranted and raved about how difficult it would be - how time consuming and so on and so on... and how the govt didn't care about the difficulties of small business owners and the self employed... But once we all got used to the forms (What 8A-8B meant and did we owe money or were we getting it back ) and understood when we needed to issue an invoice and so on - in the end - it made record keeping much easier and Elissa - as you said - it makes the yearly tax return a breeze - because everything is there!
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If you don't or can't meet the requirements for being an independent business person, then you should take a job as an employee with someone who is capable of meeting the requirements as an adult.
Thanks for the helpful tip, "Journey". I'll try. I promise!
Blues and Boogie-Woogie piano teacher.
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I'm sorry I didn't make this clear. The 1099 has to be filed with the IRS at the time of the transaction. This is for purchases of goods (not services, at least at this time). What the penalties will be for delay of reporting haven't been announced as yet.
From what I read, if I purchase a new computer for the studio from Dell, I have to send the IRS, not Dell, a 1099. A month later, if I go to Office Depot and purchase a new chair for my Studio, I have to send another 1099 to the IRS, not Office Depot.
If I order student music from FJH, which exceeds $600 in cost, I have to send the IRS a 1099.
It's one thing to keep records and send in a consolidated report at the end of the tax year. It's something else to be saddled with instant reporting of such minutia.
"Those who dare to teach must never cease to learn." -- Richard Henry Dann Full-time Private Piano Teacher offering Piano Lessons in Olympia, WA. www.mypianoteacher.com Certified by the American College of Musicians; member NGPT, MTNA, WSMTA, OMTA
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I remember in Aust. when the GST came in and then the BAS and quarterly tax reporting requirements were implemented - small businesses here ranted and raved about how difficult it would be - how time consuming and so on and so on... and how the govt didn't care about the difficulties of small business owners and the self employed... But once we all got used to the forms (What 8A-8B meant and did we owe money or were we getting it back ) and understood when we needed to issue an invoice and so on - in the end - it made record keeping much easier and Elissa - as you said - it makes the yearly tax return a breeze - because everything is there! Yes. Those who know what they are talking about, such as tax service professionals, predict that the change will also make things easier for business people such as piano teachers in the US too: ...she also sees a silver lining in the new law.
Her firm already recommends collecting tax data on all vendors, since the IRS requires that you have it on hand at the time of the transaction, not just at tax-filing time. And eliminating the corporate and goods exemptions at least means that businesses will no longer have to pour over every transaction to determine if it needs a 1099. The new rule is simpler: If it crosses the $600 threshold, it's in.
"There are probably going to be some hiccups along the way, because systems will need to be redesigned," says Couch. "But overall I believe it will make compliance on the payor end a lot more streamlined and easier."
http://money.cnn.com/2010/05/05/smallbusiness/1099_health_care_tax_change/Actually collecting existing taxes from those who today are cheating can bring an additional $300 to $500 billion in additional tax receipts -- every year. An added benefit for piano teachers who, based on the above posts, today might have no idea where they are spending their studio money is that they will have the information at hand to start being accountable and managing their finances responsibly.
Last edited by theJourney; 07/22/10 09:18 AM.
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This article presents the 1099 reporting differently than CNBC did. I guess we're going to have to wait and find out what the final rules are.
"Those who dare to teach must never cease to learn." -- Richard Henry Dann Full-time Private Piano Teacher offering Piano Lessons in Olympia, WA. www.mypianoteacher.com Certified by the American College of Musicians; member NGPT, MTNA, WSMTA, OMTA
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If I send "Tim's Computer" a 1099, and not the IRS, how will that help "remind" Tim to report his income? If he's a scofflaw, it will do nothing. There will be no change in tax receipts but a big reporting nuisance for small businesses.
"Those who dare to teach must never cease to learn." -- Richard Henry Dann Full-time Private Piano Teacher offering Piano Lessons in Olympia, WA. www.mypianoteacher.com Certified by the American College of Musicians; member NGPT, MTNA, WSMTA, OMTA
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Wavelength, you might want to read up a little more on the arguments. From the quick summary of points I've read this will be truly nighmarish for many. Here's an interesting article that discusses some details: http://blog.pappastax.com/index.php/2010/06/01/repeal-the-new-1099-law/Although I an incorporated at this time I haven't actually made any business purchases yet but I am dreading the day that I do... Regards, Ryan Thanks for posting this. If anyone has not read the article, I recommend that you do, since there seem to be erroneous conclusions in this thread. This probably won't affect my teaching business much, as I don't usually make large purchases that exceed this amount. However, for my husband's web business (and s-corp), we issue about 4 1099s per year. Now, we'll be well above that. The point being that we already spend thousands per year having our taxes prepared, and this added level of complexity will not add up since there will still be many purchases made below the $600 mark unaccounted for. I really don't see the point of it.
private piano/voice teacher FT
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If I send "Tim's Computer" a 1099, and not the IRS, how will that help "remind" Tim to report his income? If he's a scofflaw, it will do nothing. There will be no change in tax receipts but a big reporting nuisance for small businesses. One copy you keep, one copy goes to Tim and the third copy goes to the IRS (electronically, hopefully). If Tim says he only sold 10000 in computers but there are 20000 worth of 1099s filed, then the IRS knows that it makes sense to audit Tim. If Tim knows that he will be audited if he cheats on his taxes by only reporting half of his sales, then he might stop cheating. If Tim doesn't stop cheating, then he will pay back taxes with interest and penalties. If you report much more on 1099s year in and year out than you report as income, then you might also be an interesting business to audit. Those of us who don't cheat on our taxes will benefit by not paying anymore for those freeloaders who do.
Last edited by theJourney; 07/22/10 09:46 AM.
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How will I benefit if Tim pays his full taxes? Will my taxes go down? I'm not holding my breath. Will I receive more government services? I don't want any more "government services." I get too many of them already.
That not withstanding, I find the whole thing totally invasive and unnecessary.
What's unclear at this point is whether my students' tuition is a "product" which also has to be reported on a 1099. Does the IRS/Government really need to know who's taking piano lessons throughout the USA?
"Those who dare to teach must never cease to learn." -- Richard Henry Dann Full-time Private Piano Teacher offering Piano Lessons in Olympia, WA. www.mypianoteacher.com Certified by the American College of Musicians; member NGPT, MTNA, WSMTA, OMTA
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Does the IRS/Government really need to know who's taking piano lessons throughout the USA? Apparently! Big Brother is watching
private piano/voice teacher FT
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You don't have to send a 1099 to Tim's Computer. You have to send one to the IRS, and so does Tim. If you're using a credit/debit card for the purchase, the credit card company is required to report it *and you don't have to*.
edit: oh wait, you do have to send a copy to Tim. blech.
Don't get me wrong: I find the preferential treatment of credit card purchases to be creepy and potentially sinister. I also hate forms (especially 1099 which I have to use as a bandleader or solo pianist when I do corporate gigs IIRC). But even if I were to make all my business purchases in cash, this might mean I'd have to do one extra 1099 in a given year, maybe two. Realistically, though, I don't think I've made any major business purchases in cash, ever.
What if I did make 50 large cash purchases in a year, each from a different vendor and thus requiring 50 1099's? At most, that would mean writing Tax ID #'s on receipts at the time of purchase. At tax time It would probably mean an extra half hour of work for my tax preparer.
Last edited by wavelength; 07/22/10 10:23 AM.
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The article linked above included a footnote with an excerpt from Chris Edwards of the Cato Institute that illustrates to me the real problem with the law:
Businesses will have to issue 1099s whenever they do more than $600 of business with another entity in a year. For the $14 trillion U.S. economy, that’s a heck of a lot of 1099s. When a business buys a $1,000 used car, it will have to gather information on the seller and mail 1099s to the seller and the IRS. When a small shop owner pays her rent, she will have to send a 1099 to the landlord and IRS. Recipients of the vast flood of these forms will have to match them with existing accounting records. There will be huge numbers of errors and mismatches, which will probably generate many costly battles with the IRS.
The only people who are going to benefit from this new law are the hordes of accountants business owners are going to have to hire to handle all these 1099s and the people the IRS will have to hire to process all the 1099s they receive. I seriously doubt we will see a massive jump in reported income as a result of the law.
*sigh*
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What if I did make 50 large cash purchases in a year, each from a different vendor and thus requiring 50 1099's? At most, that would mean writing Tax ID #'s on receipts at the time of purchase. At tax time It would probably mean an extra half hour of work for my tax preparer.
Remember, it's not just single purchases over $600. It's any set of transactions with a single vendor that accumulates to more than $600 in a year. And that means that even if you don't know for sure you're going to spend more than $600 with a given vendor, you'd better keep track of it so you know when you have to file a 1099. And it's not just a simple matter of writing down a tax number on a receipt. My hubby files those 1099s all the time in his coin business (you have to submit one for cash transactions that pass a certain limit, and lots of people pay cash when they buy bullion), and it's a whole form that needs to be filled out and then mailed to multiple recipients. *sigh*
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How will I benefit if Tim pays his full taxes? Will my taxes go down?..... Pardon my saying so, but that reflects a view of taxes that doesn't extend much further than about an inch forward. The answer to your seemingly rhetorical question is yes. (That's an oversimplified answer, but you're being oversimplified yourself, so I'm just replying in kind.)
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Here's a link to the actual form for those who have never seen a 1099 in the flesh: http://www.irs.gov/pub/irs-pdf/f1099msc.pdfp.s. Not sure this is the EXACT 1099 form; the IRS appears to have (surprise, surprise) many different versions of the 1099, but they all look pretty similar to this.
Last edited by Monica K.; 07/22/10 10:55 AM. Reason: added disclaimer
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How will I benefit if Tim pays his full taxes? Will my taxes go down?..... Pardon my saying so, but that reflects a view of taxes that doesn't extend much further than about an inch forward. The answer to your seemingly rhetorical question is yes. (That's an oversimplified answer, but you're being oversimplified yourself, so I'm just replying in kind.) And what about the amount of taxes already given to the government? If the government were a business, it would have gone bankrupt long ago. There are so many excesses and inefficiencies that if they actually learned to run more like a business that needed to remain afloat, the money given could go a lot farther. As it stands right now, it's like putting good money after bad.
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Businesses will have to issue 1099s whenever they do more than $600 of business with another entity in a year. For the $14 trillion U.S. economy, that’s a heck of a lot of 1099s. When a business buys a $1,000 used car, it will have to gather information on the seller and mail 1099s to the seller and the IRS. When a small shop owner pays her rent, she will have to send a 1099 to the landlord and IRS. Recipients of the vast flood of these forms will have to match them with existing accounting records. There will be huge numbers of errors and mismatches, which will probably generate many costly battles with the IRS.
The only people who are going to benefit from this new law are the hordes of accountants business owners are going to have to hire to handle all these 1099s and the people the IRS will have to hire to process all the 1099s they receive. I seriously doubt we will see a massive jump in reported income as a result of the law.
*sigh*
One key thing to keep in mind is that it already is the law and has been the law for a long time that businesses properly record and keep this information. The only requirement that is being added is that the scope of coverage for actually producing a 1099 form is being proposed to be increased. I agree that the 1099 solution is not nearly as effective as the efficient and modern systems that other countries have in place. Hopefully, this will just be an intermediate solution towards a fair and comprehensive Value Added Tax that will make all this paper shoving unneeded (and open the door to reduced income taxes). However, your fears and the uncertainty and doubt being sown in some of the referenced articles have not been borne out by the existing 1099 process. Considering the sky high rate of small business failure in the US, having small businesses be managed more professionally, including maintaining properly their legally required bookkeeping, will be a good thing. I can't imagine someone with a professional attitude towards teaching who would resist having a professional and responsible attitude towards their studio finances, including knowing exactly where and on what their money is being spent. I also can't imagine that a professional would not want to fulfill his or her legal duties to document their business transactions to demonstrate that they are not cheating on their taxes and stealing from their fellow citizens.
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How will I benefit if Tim pays his full taxes? Will my taxes go down?..... Pardon my saying so, but that reflects a view of taxes that doesn't extend much further than about an inch forward. The answer to your seemingly rhetorical question is yes. (That's an oversimplified answer, but you're being oversimplified yourself, so I'm just replying in kind.) Pardon my saying so, but Hogwash. Of course, my taxes won't go down. They almost never go down. But my expenses and income lost to accounting will go up. 2012 may be a good time to retire.
"Those who dare to teach must never cease to learn." -- Richard Henry Dann Full-time Private Piano Teacher offering Piano Lessons in Olympia, WA. www.mypianoteacher.com Certified by the American College of Musicians; member NGPT, MTNA, WSMTA, OMTA
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How will I benefit if Tim pays his full taxes? Will my taxes go down?..... Pardon my saying so, but that reflects a view of taxes that doesn't extend much further than about an inch forward. The answer to your seemingly rhetorical question is yes. (That's an oversimplified answer, but you're being oversimplified yourself, so I'm just replying in kind.) Pardon my saying so, but Hogwash. Of course, my taxes won't go down. They almost never go down. But my expenses and income lost to accounting will go up. 2012 may be a good time to retire. If you were to shop at a grocery store where a majority of shoppers shoplifted instead of paying for their groceries, I can assure you that you and those others paying for their groceries would pay much, much more to compensate for the revenue lost to theft. The $300 to $500 billion per year stolen from you and your democratically elected government of the people, for the people and by the people is every bit as much money out of your pocket as the extra markup that you pay every time you shop in a retail store to pay for the losses from shoplifting. To the extent that the upwards of half a trillion dollars per year is not spent to ensure that an environment exists in the US where kids get exposed to music in public schools and there is a middle class with sufficient disposable income to pay for music lessons, these tax evaders are also stealing food right out of your mouth too.
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So does this mean the parents of our piano students will have to give us 1099s?
B.A., Piano, Piano Pegagogy, Music Ed. M.M., Piano
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