As lawmakers embark on their lame duck session, CPA firms, business owners and corporations are hopeful that Congress and the President are sincere in their desire to repeal the onerous, 1099 reporting requirements that was attached to the Healthcare reform legislation passed last March.
We have posted several articles that can be found here, here and here about this issue. In short, all consultants, sole proprietors, partnerships, S corporations, C corporations and farming businesses, will have to issue a 1099 for any vendor or individualthat they sepnd more than $600 with.
According to a Taxpayer Advocate Service (TAS) analysis of 2009 IRS data, about 40 million businesses and other entities will be subject to this new reporting requirement. It would require a painter to issue a 1099 to Home Depot or Lowes, if he or she spends more than $600 on supplies with them for the year. This would be true for landscapper, to issue a 1099 to the gas station, he purchases gasoline from, or the consultant who spends more than $600 with Office Depot on office supplies.
If each business entity has to issue, on average, just twenty-five 1099s each year, more than 1 billion 1099s would be issued annually. A volume that would seem difficult for the IRS to even be capable of handling.
Max Baucus (D-Mont), Chairman of the Senate Finance Committee has stated that he would introduce legislation to repeal the expanded 1099 reporting requirments, that will start in 2012
In an article published by CNNMoney.com, Max Baucus is quoted: "I have heard small businesses loud and clear and I am responding to their concerns ," Baucus said in a prepared statement. "Small businesses are the backbone of our economy in my home state and across the country, and they need to focus on creating good-paying jobs -- not filing paperwork."
In addition to the new reporting requirements, the fines and penalties for incorrect and late filings of 1099s, w2s and other information returns, has also increased significantly.
If this reporting requirement stands, CPA firms envision, a major increase in work volume and increased cost, for the business owner, in order to stay compliant with this burdensome and onerous piece of legislation.
So, you started a business and bought a copy of QuickBooks. You are going to load up that bad boy on your computer, enter a few numbers and away you go. You're all set to keep detailed financial records.
Who needs to spend a few hundred dollars a month for the services of a CPA. You're a do it yourselfer, you started your own business, so surely you can handle the minor administrative details related to managing the financial administration of your company.
A CPA is an important part of your management team and needs to be considered as such. He or she brings critical experience, knowledge and insight to help you run, manage and strategize your business.
CPAs spend hundreds of thousands of dollars investing in their education, years working and gaining experience and must pass an exam to demonstrate a base level of knowledge before they can practice as a CPA.
They typically deal with hundreds of clients a year and encounter thousands of unique situations. They understand the challenges a new business owner faces and how best to help that business owner.
A CPA can help the business owner:
Maintain accurate financial records. This is critical if you ever want to get a loan from a bank, attract investors or just have accurate financials available to help you make smart decisions in your business. It is not uncommon for us to take a look at a QuickBooks file from a business owner and find information missing or improperly coded, thus making the financials meaningless.
Assist with tax planning and preparation. One of the biggest challenges facing business owners, especially recently, is not knowing the tax consequences of making a profit, hiring employees, providing or not providing healthcare, as well as numerous other tax related questions a business owner must deal with on an on-going basis. A CPA is a key resource to help guide you through this maze.
Business guidance. A CPA has experience and knowledge in dealing with numerous businesses and countless unique situations a business owner may face. He or she can often provide perspective and advice on how to avoid mistakes and provide guidance on some best practices for business owners.
These are just a few areas that a CPA can assist and support you as you launch your business. If you are considering or have started a new business, visit our New Businesses resource web page.