The 1099-Misc Filing Date Is Just Around The Corner—Are You Ready?


Article Highlights:

  • Independent Contractors
  • Non-employee Compensation
  • 1099 Filing Requirement
  • Due Dates
  • Penalties
  • Form W-9 and 1099 Worksheet

If your business engages the services of an individual (independent contractor), other than one who meets the definition of an employee, and you pay him or her $600 or more for the calendar year, then you are required to issue that person a Form 1099-MISC to avoid penalties and the prospect of losing the deduction for his or her labor and expenses in an audit. Payments to independent contractors are referred to as non-employee compensation (NEC).

Note: The IRS has cautioned taxpayers who are treating rental activities as a trade or business for purposes of claiming the 20% passthrough deduction that they are required to issue 1099-MISC forms to their services providers who meet the $600 test for those rental activities.

Because so many fraudulent tax returns are filed right after e-filing opens up in January, the IRS requires 1099-MISCs for NEC to be filed by January 31 and will not release refunds for individual income tax returns that include the earned income tax credit until the NEC amounts can be verified.

Thus, the due date for filing 2019 1099-MISC forms for NEC is January 31, 2020. This is also the same due date for mailing the recipient his or her copy of the 1099-MISC.

It is not uncommon for a business or rental property owner to have a repairperson go out early in the year, pay him or her less than $600, use his or her services again later in the year, and have the total paid for the year be $600 or more. As a result, the business or landlord may have overlooked getting the needed information from the individual to file the 1099s for the year. Therefore, if you own a business or are a landlord, it is good practice to always have individuals who are not incorporated complete and sign an IRS Form W-9 the first time you engage them and before you pay them. Having a properly completed and signed Form W-9 for all independent contractors and service providers will eliminate any oversights and protect you against IRS penalties and conflicts. If you have been negligent in the past about having the W-9s completed, then it would be a good idea going forward to establish a procedure for getting each non-corporate independent contractor and service provider to fill out a W-9 and return it to you.

The government provides IRS Form W-9, Request for Taxpayer Identification Number and Certification, as a means for you to obtain the vendor’s data you’ll need to accurately file the 1099s. It also provides you with verification that you complied with the law, in case the vendor gave you incorrect information. We highly recommend that you have potential vendors complete a Form W-9 prior to engaging in business with them. The W-9 is for your use only and is not submitted to the IRS.

The penalty for failure to file a required information return due in 2020, such as the 1099-MISC, is $270 per information return. The penalty is reduced to $50 if a correct but late information return is filed no later than the 30th day after the required filing date of January 31, 2020, and it is reduced to $110 for returns filed after the 30th day but no later than August 1, 2020. If you are required to file 250 or more information returns, you must file them electronically.

In order to avoid a penalty, copies of the 1099-MISCs you’ve issued for 2019 need to be sent to the IRS by January 31, 2020. The forms must be submitted on magnetic media or on optically scannable forms (OCR forms).

Note: Form 1099-MISC is also used to report other types of payments, including rent and royalties. Payments to independent contractors are reported in box 7 of the 1099-MISC, and the dates mentioned in this article apply when box 7 has been used. When the 1099-MISC is used to report income other than that in box 7, the due date to the form’s recipient is January 31, 2020, while the copy to the government is due by February 28, 2020.

If you have any questions, please call. This firm prepares 1099s for submission to the IRS along with recipient copies and file copies for your records. Use the 1099 worksheet to provide this office with the information needed to prepare your 1099s.

Why You Should Outsource Your Payroll Needs—Important Tip

Why You Should Outsource Your Payroll Needs

With tax rules changing more quickly than the ink can dry on the tax laws books, payroll has become a full-time job. Are you a business owner that’s tired of trying to keep up with all the proposed and passed alterations? There are things that you should do on your own, and then there are things that can end up costing you more in the long run. To ensure that you are in compliance with the law, it is an excellent idea to outsource for your payroll needs and let it be someone else’s problem.

Save Money

Instead of hiring someone in-house to manage your payroll, if you outsource, you will save money. Since you don’t have to pay someone full-time, you also don’t have to worry about other employee perks like the cost of medical insurance. The time that it takes a professional payroll expert is very little. And for most companies, it’s not worth it to hire someone to allocate their time and resources solely to it.

They’re Up to Date

Since things are changing so quickly, an outsource payroll company is best for handling all aspects of tax regulations and laws. If you make a payroll mistake, then you have to deal with the IRS. That is definitely not something that you want to do. If you hire a company and all they do is payroll, then they will have the information necessary to ensure that things are done correctly. This way, you aren’t leaving yourself vulnerable to an audit and potentially expensive fines if something is amiss.

Reduce the Risk of Security Breaches

When you hire a third-party payroll company, there is less risk of security breaches. Since a payroll specialist deals with data like social security numbers and other private information, an outsourcing payroll company will have enhanced security to keep things safe. If you have subpar software, then you can leave your employees’ information vulnerable. Also, there is always a chance when you do payroll in-house that you could be opening yourself up to embezzlement or other misappropriation of funds. With a third party handling your payroll issues, you don’t have to worry about that.

Better Tracking of Asset Allocations

A third-party payroll asset company will also provide you with a running analysis of what is going out versus what is coming in financially. You’ll always know where your finances are. That is an excellent way to keep track and ensure that your finances are healthy from month-to-month.

Instead of hiring a full-time employee to handle your payroll, it is a wiser choice to hire an outsourcing payroll company. They have increased security, they know the laws, and they won’t leave you vulnerable to audits. If you’re looking for a team of trained professionals to handle your payroll needs, visit Jetro Tax today.

What to Do if You Are Still Late on Your Taxes and You Didn’t File an Extension?

What to Do if You Are Still Late on Your Taxes and You Didn’t File an Extension?

If you are one of the many people who failed not only to file your taxes but also to file an extension, you might be living in a panic about what the consequences will be. The good news is that even if you missed the deadline, there are still ways to make it up and get back on track. If you owe money, ignoring it will not make it go away. It will only make it worse. So follow these steps to smooth things over.

What Happens if You Don’t File Your Taxes or an Extension?

If you missed the deadline to file and didn’t take the steps to file an extension, you might have to pay interest and penalties. If you failed to pay or file an extension, the consequences can be pretty stiff. There are two types of penalties that you are automatically subject to by the IRS. If you fail to file, you are automatically assessed at 5% per month penalty up to a 25% maximum. If you fail to pay the penalties, there is an additional 0.5% per month up to a 25% maximum. If they are both accessed, then the failure to file penalty will be reduced by the failure to pay penalty.

What if You Can’t Afford to Pay What You Owe?

Even if you can’t afford to pay your taxes, you still have to file. When you file an extension, it lets the IRS know that you are not evading them and that you know that you owe taxes. After you file for an extension, it is possible to negotiate with the IRS to make payments that you can afford. You can either ask for another extension or try to work with them to devise a payment plan.

If You File, Do the Penalties Stop Accessing?

The bad news is that although you can try to work with the IRS, the fees do not stop accruing until you pay off what you owe. So, it is a good idea to try to pay off the total as soon as you can. It might be a good idea to start to withdraw from your savings to pay your taxes, especially if the interest you are making is less than what you are accruing from your debt with the IRS. Taking out a payday loan or other high-risk loan with a high interest is probably not a good idea. That will end in digging a bigger debt hole.

What If I Ignore It?

Ignoring it won’t make the situation go away. If you fail to pay your taxes, it could lead to a host of consequences including, in egregious cases, jail time. It is better to tackle it head-on. The longer you go without filing your taxes, or an extension, the more money you will owe in fees and penalties. For help with your overdue taxes or IRS troubles, call Jetro Taxes to get the help you need to get back on track today.

Clarification On Taxes: What To Do If You Receive An IRS Notice

Clarification On Taxes: What To Do If You Receive An IRS Notice

There is nothing that can rattle a business owner’s cage more than seeing an envelope come from the IRS. But, the good news is that it doesn’t always have to spell trouble. If you get a letter from the IRS about your taxes or your payroll taxes, the steps you take to rectify it can make things go a lot smoother, whatever the issue may be. If you get a notice, it is essential to take these six steps to minimize any trouble.

Even though it can be super difficult not to get worried, it is never a good idea to panic when you are notified. In most cases, a letter from the IRS is nothing to worry about. If you panic, it is only going to make the situation more stressful for you.

Typically, when you get a notice, it can be cleared up by just contacting them with a little information that they might be requesting. Make sure to read the notification carefully to fully understand what it is that they are asking from you. This way, you can get all the details and take care of the issue quickly.

To make sure that you are answering correctly, you have to track down all of your tax returns from the previous five to seven years. You want to make sure that if you supply the IRS with the requested information, it is correct and truthful. If it doesn’t match up to what they have on file, that could send up a red flag.

If you aren’t sure what the notice is about or what specifically the IRS is asking for, don’t be afraid to call. If you need clarification, there is a number on the notice where they will be more than happy to go over the letter in detail and explain to you precisely what it means and what you need to do. It is always better to ask for clarification than to guess.

Be sure to make copies of anything that you send to the IRS, even if it is their form that you filled out. Also, if you do call and talk to anyone, make sure to take notes about who you spoke with, when, and what they said. That way, you’ll have a record of the entire situation should there be a problem.

If you are concerned about the issue, don’t have the information you require, or just feel like you are being asked for something mistakenly, then call a Milwaukee tax specialist to help sort through the details. When it comes to dealing with the IRS, it is always best to ensure you are doing things correctly to protect yourself.

If you get a notice from the IRS about your taxes or your payroll taxes, don’t panic. But, do make sure to address it immediately and properly to save yourself potential headaches and penalties. If you need the help of a Milwaukee tax specialist, contact Jetro Tax today!

Things To Consider When Hiring A Milwaukee Accountant

Things To Consider When Hiring A Milwaukee Accountant

If you’ve been taking care of your own books, you know just how time-consuming that process can be. As a small business owner in Wisconsin, you can save yourself a lot of time by hiring a Milwaukee accountant. Of course, you’ll need to make sure that you hire the right one. Hiring an accountant requires a lot of trust, so before you commit to an accountant, keep the following considerations in mind.

State and County Laws

When you hire a Milwaukee accountant, make sure that he or she has a firm understanding of state and county tax laws. Most accountants will understand the ins and outs of federal tax law, especially if they’ve been in business for more than a few years. However, tax laws differ between states, and even some counties within the United States have their own tax law. As a small business owner, you have to make sure that you stay on top of tax laws. The right Milwaukee accountant will help you stay within the law so that you can focus on your business instead.

Customization Options

When hiring an accountant, you’ll need a fair amount of flexibility. Every small business is different, and each one needs different options. If you hire the right accountant or bookkeeping service, your accountant won’t pressure you with any upsell tactics. You can customize your service to get exactly what you need and nothing more. Whether you need tax preparation, accounting, payroll services, or any combination of accounting services, you’ll have those options. The best accounting services can even provide you with customizable plans within each of those services so that they serve your business in the best way possible.

Simplicity and Availability

Hiring a Milwaukee accountant should provide you with peace of mind. You get to focus on your creative vision and the day to day aspects of running your business. In other words, you get to handle all of the things that you already love about running a business. Your accountant will do what accountants do best, taking care of all of the difficult numbers and legalities. While your accountant simplifies your bookkeeping and taxes, he or she should also be available for when you have questions or want to discuss options.

Your Milwaukee Accountant

If you’re looking for a Milwaukee accountant, Jetro and Associates is here to help with all of your payroll, tax, and bookkeeping needs. We offer all of the above qualities and so much more. With a flat monthly rate, we’ll never add unwelcome surprises to your business life. Are you ready to simplify your business? Contact Jetro today.

7 Biggest Legal Loopholes For Attorneys & Law Firms In The New Tax Law

7 Biggest Legal Loopholes For Attorneys & Law Firms In The New Tax Law

We could all stand to pay less in taxes, right? Fortunately, the new tax law has given law firms plenty of opportunities. There are seven major ways to slash your taxes and put more profit in the bank each year. I call them “loopholes” because so few people know about them but all seven are perfectly legal tax strategies provided for in the new tax law.

You can make a few adjustments to how your business is set up or how you handle your expenses and save big at tax time. Whether you’re able to take advantage of one, two, or all seven of these strategies, it’s well worth your time and effort to implement them. Without further ado, here are seven legal tax loopholes for law firms:

1. The August Rule

This loophole allows you to literally pay rent to yourself, tax-free, and we owe it all to golf in the 1970s.

If you’re a golfer, you know the Masters Tournament is held every year in Augusta, Georgia. Like the Superbowl or the Olympics, the Masters draws a lot of visitors who are always looking for lodging nearby. Wealthy home-owners near the course rented their homes during the tournament and lobbied for that income to be tax-free since they weren’t full-time rental homes.

The result? When you rent your personal home for up to 14 days per year, that income is not taxable. This is true even if you rent the home to a business you own.

Next time you need to hold a corporate meeting or a staff off-site, hold it in your home rather than a hotel or another rental. You can claim the rental expense for your business, as long as you document the business use and confirm that it was a reasonable rate (find comparables by getting quotes from hotels or even Airbnb rentals in the area).

Tax-deductible for your business and tax-free for your personal income taxes equals and win/win.

2. Mixing Business and Pleasure

If you’re as busy as most law firm owners, finding time for a vacation is a challenge. Your best bet may be to fit business and vacation time into the same trip.

Thankfully, that can mean a lot of vacation expenses are picked up by your business, completely tax-deductible.

In order to deduct a trip as a business expense, you need to be conducting business the majority of the time. The IRS measures in days, meaning you’d need to spend at least 4 days out of a one week trip mainly on business (business needs to be 25% of your trip if it’s outside of the U.S.). Traveling to and from your destination is considered part of the business trip, so that already gives you two days. Plus, if you’re in meetings or attending
a conference from 9-5, there’s no reason you can’t enjoy some R&R after hours.

Travel expenses for flights, car rentals, or vehicle expenses (you need to leave your tax home to incur business travel expenses) can all be deducted. So can lodging and 50% of meals expenses related to your business transactions.

If you’re bringing the family along on the trip, just make sure your expenses are “necessary and ordinary.” You can deduct the cost of a single room, but not the cost of a family-sized suite, for example. As long as you document, feel free to rent the suite and only deduct the portion that coincides with a single-room rate.

3. Learning the Value of Work has Tax Benefits

Do you want your children to learn the value of a hard-earned dollar and maybe even take in interest in the family business?

The new tax law makes it better than ever to hire your children.

If your firm isn’t incorporated, there are some great perks to hiring your own dependent children. Instead of giving them an allowance or paying them to mow the lawn, why not pay them a reasonable wage to work around the firm? Their income will be exempt from Social Security, Medicare, and federal unemployment tax withholdings. They’ll also be able to shelter a significant amount of that income with their standard deduction since it’s earned income.

On your end, the wage expenses are fully tax-deductible, just as they would be if you hired someone else. Depending on your child’s age, this is a great way to get cleaning and lawn care, light office work, or some computer support at your firm.

4. Get More Mileage out of Your Vehicle Expense

If your firm uses a vehicle at least 50% for business purposes, you can deduct a number of expenses. The big decision is whether you’ll track those expenses one by one (actual expense method) or simply multiply the miles driven by the predetermined rate (standard mileage rate method). The standard rate has always been popular because it’s easier to track, but the Tax Cuts and Jobs Act just made the actual expense method much more appealing.

The actual expense method allows you to include depreciation on your vehicle. Under the newest tax update, the limits on vehicle depreciation were greatly increased and bonus depreciation can be applied to many vehicles. Bonus depreciation allows a business to take additional depreciation expense deduction when a vehicle is first put
into use.

Additionally, if you have a more expensive vehicle with higher than average repair and maintenance costs, the actual expense method is likely going to be your best bet.

5. Shrinking Meals Expense Deductions

Client networking and employee fringe benefits have been a part of professional businesses for years. Recent tax changes have cut back on the deductibility of a lot of these expenses, making it harder to justify those expenses. The changes have also made the details so complicated that even the IRS isn’t quite sure what they mean.

What was once meals and entertainment expense deduction now excludes entertainment. Taking a client or prospect out for lunch or a round of golf used to be deductible expenses. The golf is now off the table. Eating in a setting that includes entertainment (like a dinner theater or club) is also disallowed, although some CPAs
would argue for the deductibility of the eating portion.

Another big change is the deductibility of fringe benefits such as an employee cafeteria. Unless they’re part of an event like an employee Christmas party, these items are now 50% deductible instead of fully deductible as they were before. Don’t worry, the morning coffee and donuts should be considered a “de minimis” expense that’s not big enough to be consequential for tax purposes.

6. The Hidden (Fringe) Benefits of Hiring Your Spouse

If you have a small, family-owned practice, there could be big tax incentives for hiring your spouse. Hiring them on a part-time basis and paying them in the form of fringe benefits can be both a deductible expense for the business and a tax-free source of compensation for your family.

A Section 105 medical reimbursement plan can form most or all of the reasonable compensation paid to your spouse for their work, as long as it is within limits. These contributions are a wages expense for the employer and can be used by the employee to cover out of pocket medical and dental expenses and insurance premiums.

There are a few words of caution on this loophole. In order to be allowed by the IRS, the Section 105 plan needs to be carefully planned out and documented. Make sure the compensation you provide to your spouse isn’t too much or too little and that they are actually performing a necessary job in your firm.

Also, if you have multiple employees in the firm, you need to be careful. Since this is a health care expense reimbursement plan, you can’t discriminate between employees and offer it only to one, even if the one is your spouse and even if it’s their only form of compensation.

7. The Perfect Business Structure for Your Firm

Choosing the ideal business structure for your firm effects both your liability and your tax situation. As a law firm, you’re fully aware of the liability issues but the Tax Cuts and Jobs Act has just had a huge impact on the tax implications of your structure.

Pass-through entities such as S-corps and LLCs may qualify for a 20% deduction on qualified business income. This helps to balance the tax cut given to corporations, but it’s limited in availability. SSTBs (Specified Service Trade or Business) can only take the deduction is income is below $207,500 for individuals and $415,000 for couples. At the higher end of this limit, the deduction starts to phase out.

If your income is higher than the limits, you may want to look into becoming a C-corp. Although C-corporations face double taxation (paying at both the corporate and personal levels) the corporate tax rate has been reduced to a flat 21% across C-corps. Consider the necessary steps and hoops and talk with your tax advisor about which entity would give you the best results.

These 7 tax law loopholes can save you thousands at tax time. You just need to know which ones are a fit for you and how to fit them into your overall tax strategy.

If you don’t have a tax advisor, you’re paying way more than you should be. Click here to book your complimentary strategy session with me.

Avoiding An IRS Audit As A Small Business Owner

Avoiding An IRS Audit As A Small Business Owner

When you own a small business, you have so much extra time on your hands that you’d welcome the opportunity to spend hours upon hours dealing with an IRS audit, right?

Yeah, not exactly.

Watch this video to learn tips to avoid an IRS audit on your taxes and also learn about some things you can do to bullet proof yourself from an audit.

We also had an article posted on this topic on a industry site. You can read that here:

Avoiding an IRS Audit

We are a Milwaukee Accountant working for small businesses across the country.

Five Useful Tips From Experts in Bookkeeping

Five Useful Tips From Experts in Bookkeeping

Not everyone loves bookkeeping. There are some people who would rather pour salt on a wound than update business records. Are you the type to throw all your records into a trash bag? If you are, then you know the struggles of trying to put everything together at the end of the fiscal year. Waiting until the last minute can be costly for your business. It can also lead to frustration, anxiety, and mistakes. If you own a business, accurate and up to date business records are a necessity.

Not to mention, it is a requirement, by law, that your business records are correct and completed promptly. As a result, your only choice is to get your records organized and keep them updated. The following are five useful tips from expert bookkeepers to give you that added push to keep your documents in good order.

Establish Bookkeeping Time

The most important tip for keeping your business records updated is to establish a time each week to work on your paperwork. When you stay on top of your bookkeeping, you will not become overwhelmed. Additionally, by keeping accurate and timely records, you will instantly know if any concerning issues are developing.

Accounting Software

Another tip is to purchase an accounting software program that works for your business. Not all software is created equal. Furthermore, the number of available products can be overwhelming. Therefore, you may want to consult a bookkeeping expert before proceeding.

Banking Accounts

As a business owner, you need to keep your business account separate from your personal account. You should keep them separate to prevent personal liability from your business transactions. If you don’t keep your accounts separate, you can become personally liable for business transactions that go wrong.

Taxes and Compliance Regulations

To keep yourself out of hot water, you must properly register your business. Moreover, if you have employees, you will need to register to withhold taxes on their behalf. If you are a sole proprietor with no employees, an accounting software program may be all you need. However, if you have a large operation or a complicated business structure, you should contact an expert accountant to discuss your bookkeeping needs.


Finally, you must keep your receipts. All of them. If you want to deduct business expenses, you can only do so if you have your receipts on hand. Regarding paying employees wages, you will need to keep a record of those payroll transactions. Likewise, if you make money on sales of products, goods, or services, you must keep copies of your invoices. Thankfully, there are electronic options available. In the past, you might have needed to use that trash bag, but now you can upload those receipts into a software program.

In Conclusion

As a business owner, it is important to stay on top of your records. Not only is it a legal requirement, but it is also necessary to monitor business progress. By following the five tips from expert bookkeepers, you should avoid becoming overwhelmed with your bookkeeping. On the other hand, if you are struggling to keep up with the complexity of your business records, contact an expert accountant for your bookkeeping needs. Look no further than Jetro Tax to help solve your bookkeeping concerns. Call 844-327-9272 today!

Utilizing Xero For Receipt Tracking

Xero accounting software.

Sick and tired of keeping paper receipts on file for years upon years?

Xero has functionality to keep track of receipts directly in your books. If you have a transaction that has already been booked you can go into the Xero app and upload the receipt for it. If you have a receipt that has not been booked in the accounting system yet you can also add a receipt using the app and then when the transaction comes through, we will be able to match it.

Below is a video using both methods, one done by us and one done by Xero.