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I just e-mailed my CPA to see what he says about this. Doesn't make sense to me. We already 1099 all our vendors (and our owners). If owners ALSO have to 1099 these vendors, that's double reporting for the same income. Seems dumb to me! They're just worried they aren't getting every penny of income tax possible from mom and pop companies, is my thinking.
In my city, we have already had several 1099 problems...
One property is owned by two brothers... when the 1099 HUD requirement started, one brother offered his social security number... both brother's use the same CPA...
Two years later, the IRS began an audit because each brother properly only claimed his 50% share of total income and the IRS had a 1099 showing 100% income to one brother.
Their CPA applied for a Tax ID number and now they file a partnership return... costs more money and more papers to file.
The Partnership is "Smith Brothers Properties"
Last year, the city started an audit because city revenue code states taxes are due on all income from business based in the city irregardless of where derived. The city said "Smith Brother Properties" must disclose all business interests and income.
"Smith Brothers Properties" comprises a single 4-plex property and the brothers have paid city business license and rent board registration fees since day one. Smith Brothers had to prove they had no other business aside from one 1920's 4-plex.
My long winded point is the brothers have done everything right and above board... didn't save them from the added costs of forming a partnership or prevent two audits... all over 1099's that are in some computer data base.
Couple that with the cities "Just Cause Eviction" statute plus several other city ordinances and it is no wonder why many are just giving up...
I just e-mailed my CPA to see what he says about this. Doesn't make sense to me. We already 1099 all our vendors (and our owners). If owners ALSO have to 1099 these vendors, that's double reporting for the same income. Seems dumb to me! They're just worried they aren't getting every penny of income tax possible from mom and pop companies, is my thinking.
I now have handyman who want me to split my accounting for their materials and their labor...so they won't have to report as much and only get taxed for their labor.
I understand it a little bit but it is a lot of work.
I now have handyman who want me to split my accounting for their materials and their labor...so they won't have to report as much and only get taxed for their labor.
I understand it a little bit but it is a lot of work.
That doesn't sound right. They should be keeping up with what they spend on materials themselves. It is deductible. You 1099 the full amount paid. they add up all the 1099s and deduct their own expenses. Unless you paid for materials yourself, in which case it should not be included in the 1099, it does not make sense.
That doesn't sound right. They should be keeping up with what they spend on materials themselves. It is deductible. You 1099 the full amount paid. they add up all the 1099s and deduct their own expenses. Unless you paid for materials yourself, in which case it should not be included in the 1099, it does not make sense.
It is very common here for workman to charge separately for labor and materials... Workman as opposed to license Contractors.
It's a way of making it difficult to pay independent contractors off the books. Headache, maybe, but aside from making sure the IRS get their revenue from the contractors, they also want to make sure that employers aren't "permalancing" people.
Permalancing (from "permanent freelancing") is when an employer makes all of the requirements of a contractor that the employer does of regular employees--must work mostly on-site, during prescribed hours, full-time, using the employer's equipment, with direct oversight and guidance by someone in the company, etc.--but without offering the contractor benefits or paying unemployment insurance. It's a scabby way of cheaping out because the contractor is an employee in every way but name. It also screws over the contractors, who have to pay the full 14% on Social Security Tax.
Many people in many fields are going to have issues with the new laws about contractors, but as a freelancer in another field (publishing), I appreciate it. A six-month or one-year contract is one thing. Indefinite on-site work with no benefits or unemployment insurance is just plain unethical. If you want to treat me like staff, then make me staff. Otherwise, I'm working at home on my own computer, in my jammies, at hours of my choosing, with a beer on my desk if I so desire, thanks.
It is very common here for workman to charge separately for labor and materials... Workman as opposed to license Contractors.
I can see your getting an invoice that separates materials and labor. What I do not understand is the workman asking for a 1099 that separates materials and labor.
Here, I would get an invoice with copies of receipts for materials plus the cost for labor. I pay the invoice amount. The 1099 reflects the total. The workman is responsible for deducting the materials on his own taxes. If he has a big enough business, a simple accounting program like QuickBooks should make it easy.
I can see your getting an invoice that separates materials and labor. What I do not understand is the workman asking for a 1099 that separates materials and labor.
Here, I would get an invoice with copies of receipts for materials plus the cost for labor. I pay the invoice amount. The 1099 reflects the total. The workman is responsible for deducting the materials on his own taxes. If he has a big enough business, a simple accounting program like QuickBooks should make it easy.
It sounds as if you are doing the taxes for him.
Contractor License Laws are very specific in CA... a person is free to hire his or her labor out...
That changes the moment a person supplies labor and material and the job cost exceeds $500.
Senate Democrats urge the House to repeal hated IRS rule - Yahoo! Finance (http://finance.yahoo.com/news/Senate-Democrats-urge-the-cnnm-3724548441.html;_ylt=AuL1tRemIXdW5Cd7ATXDCLy7YWsA; _ylu=X3oDMTE2cjJqcGdpBHBvcwMxMgRzZWMDdG9wU3Rvcmllc wRzbGsDc2VuYXRlZGVtb2Ny?x=0&sec=topStories&pos=9&a sset=&ccode= - broken link)
Not that this wasn't expected but I find it somewhat amusing the democrats want to go on record as repealing this provision. They put it in!
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