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New 1099 rules that you need to know!

Notice the image and the passage circled in RED. This means that your clients, if they pay you by credit or by third party payment system such as PayPal no longer need to issue you a 1099. This is excellent. Only if they pay you by check or cash should they be issuing you a 1099. I love this new rule because it will alleviate me of sending out numerous 1099’s (I am now only going to have to send out 1 because I wrote only one person a check!) However, if most people are like me they don’t read the rules they just do what they’re used to.

I have already started receiving 1099’s erroneously and I almost sent them out myself when I did not need to.

 

So, if you’ve send them out and should not have, you’ll need to find out from an accounting professional or someone how to correct the error otherwise your poor vendor will have their income reported twice and that’s not right! 🙂 So, please let this be a good reminder for us all (especially ME) to read the rules before proceeding each year with someone we are used to doing. Especially when it comes to taxes because this stuff changes every single year! This is finally one change I can embrace!

About Stephanie Watson

Mom | Wife | Virtual Assistant | Content Strategist
Stephanie has been working from home for over 20 years as a virtual assistant, template bender, and content writer. She's currently transitioning to business coach. You can learn more about her at her website http://www.barrypublishing.com.

Comments

  1. I’m replying to my own post just to give you another post confirming this by someone who is an expert:

    http://blog.highbeambusiness.com/2012/01/irs-forms-form-1099-k-and-form-1099-misc-instructions-still-confusing-taxpayers/

  2. http://www.taxquips.com/index.php?id=2152 this is tax mama’s answer. I wonder if Tax Mama sees this if she’ll answer whether or not those of us who pay people via paypal still need to issue 1099’s?
    Stephanie Watson recently posted..Need administrative work but don’t want to hire anyone?My Profile

  3. Yea Tax Mama did already answer this. If you pay people via paypal NO you do not have to issue a 1099 MISC anymore.

    http://taxmama.com/asktaxmama/no-1099-misc-if-paid-by-credit-card/
    Stephanie Watson recently posted..Need administrative work but don’t want to hire anyone?My Profile

  4. Hi Stephanie,

    Thanks for bringing this to my attention.
    I can’t even remotely imagine why CPAs would be confused about this. All you need to do is to read the instructions for the form 1099K.
    http://www.irs.gov/pub/irs-pdf/i1099k.pdf

    The SECOND statement in the instructions is as follows:
    New Form 1099-K. Payment settlement entities may have to report merchant card payments and third party network payments on new Form 1099-K instead of Form 1099-MISC.

    This time, IRS actually made it very clear.

    Don’t you think?

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