Small business owners are always looking for ways to save, and many of them continue to think that a great corner to cut is having a professional accountant. Professional accountants themselves obviously have a vested interest in arguing that DIY accounting is a fool's errand, but even accounting software companies make this suggestion. The 1099-K is yet another reason why you shouldn't skimp on the accounting and bookkeeping help. 1099-K instructions are themselves slightly confusing, and if you do anything remotely complicated in your payment and expense processing, figuring out how to maximize deductions and even fill the Schedule C tax form in correctly can be a challenge.
The basic purpose of the 1099-K is to allow the IRS to see exactly how much money people who do business online and accept online payments are making. Companies that handle online payments, like Amazon, PayPal, and credit card checkout portals, are required to file a 1099-K to the IRS for each of their customers that receive more than 200 transactions with total value of over $20,000 in a year. Then, in your yearly small business tax filing, you have to record the 1099-K number in field 1b of your Schedule C. Any business expenses or deductions, like the payment processing fee or shipping, should get recorded on line 2 so you can be sure the IRS knows what your actual profits from those online transfers were so they don't overcharge you.
On the surface, handling this change isn't that big of a deal. It does mean you have to keep much better records of every cent included in a transfer you receive so you can account for all the business expenses that reduce the amount of money that actually ends up in your bottom line. And if you're just selling on eBay, accepting PayPal payments, you probably have bookkeeping in place that gets you most of the way to prepared for the 1099-K. Even in this circumstance, if you have a regular business you should be using an accountant's help at least once a quarter to make sure your books and records are in order and to help you file your taxes.
But if you have anything more complicated going on, like if you send or receive the 1099-Misc tax form as well, you're going to be facing much more paper work and effort to record everything correctly. Failing to handle this bookkeeping and accounting work appropriately will cost you in the form of higher taxes and the time you waste failing to take care of it. An accountant, on the other hand, will only cost the price of his or her fee. In return, you'll be sure you pay the minimum legal amount of taxes, minimize the chances of an audit, don't spend time on something outside your strengths, and get the peace of mind that comes from having this essential business requirement done correctly.
The 1099-K is a headache and it causes people with small businesses a lot of stress. But it can be handled far more effectively with a professional accountant. This tax form is a blessing in the sense that it should give small business owners who sell online yet another incentive to make a choice that should already be easy for them: getting an accountant.
Article Source: http://www.abcarticledirectory.com
Simplify your tax requirements with our 1099-k instructions for online sellers.
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