Now is a great time to start collecting Social Security numbers and EIN (Employer Identification Numbers) for all of your non-employee workers. You will need to prepare a Form 1099-MISC for every person or non-corporate business structure that provided more than $600 of services for your business in 2011. You also need to report anyone that purchased more than $5,000 in products for resell.
There are some exceptions to this rule, for example, in the case of ‘established retail outlets.’ Without a lot of other definitions, we’re taking the position that you don’t have to report a bricks and mortar retail outlet. But, if you sell to a smaller, home-based business or online business, it should be reported.
You need to complete the forms by January 31, 2012. And you need to send a copy into the government by February 28, 2012, along with the Form 1096 as a summary form.
There is also a new form this year. The much discussed Form 1099-K is finally coming. You might have heard it called the new Pay Pal reporting requirement. Starting 1/1/2011, Merchant Account companies and Pay Pal are required to furnish a Form 1099-K (with copy to the government) to anyone who has $20,000 or more in sales and 200 transactions or more. The amounts reported will be on the cash basis and will include sales tax and shipping & handling.
Chances are there will be a lot of questions, and probably mis-reporting as we move into the new Form 1099-K. It’s never been more important to have accurate bookkeeping. Report this wrong and you’re just asking for an audit.