Phone: 206-743-0189 | Email: info@kristymonahan.com

Month: January 2016



January 25, 2016

What is the 1099-MISC form and Why Do I Care?

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As someone else’s employee, you were probably used to getting a W-2 at the end of the calendar year which reflected your gross earnings and taxes withheld on your behalf. You needed this in order to file your tax return to prove your income and tax payments already made.

A 1099-MISCis essentially the same thing, only it’s provided to Independent Contractors to prove the income they received from you.  As a business owner, you are required to give 1099-MISC’s to any independent contractors that worked for you in a calendar year and that you paid at least $600 or more (this does not include any payments made via a credit card…credit card companies issue their own form 1099 to your vendors where a credit card was used for payment).  You will be asked by your tax practitioner if you issued 1099’s to your vendors.  This is a question with a required answer on your corporate tax returns.

Now, not every single vendor needs a 1099-MISC form.  So, how do you know which vendors to send these forms to?  First, I would highly recommend reading these instructions provided with the form from the IRS.  This delineates pretty clearly who needs a 1099.  The general rule of thumb:  If they are NOT incorporated (a sole proprietor) and you paid them more than $600, you need to issue them a 1099-MISC.  Finally, these are due to your vendors by January 31st of each calendar year.

Most any tax practitioner or bookkeeper can help you complete these forms if you do not feel comfortable tackling the task (this is a service we offer).  You are able to order special IRS red forms here.  The form is updated each year and the instructions can change annually as well; it’s important to stay on top of these guidelines.  If you file a paper form, you will also be required to file form 1096.  This form is a summary of ALL of the 1099’s you filed for any given tax year.

If you would rather file electronically, there are several great online resources for doing so.  A simple Google search will lead you to several different options that vary in cost and service offerings.  The best thing about electronic filing?  You don’t need special red forms and you don’t need to file the 1096!  

Happy Tax Season!

January 4, 2016

Things Your Accountant Wants You To Know

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You’ve nurtured it from the ground up, spent countless hours worrying, strategizing, pounding the pavement. You’ve invested your own personal seed money and more time than can be counted on a gamble and it’s paying off. Your business is yours. It’s your baby. We totally get it.

When you’ve spent as much time as you have on something, it’s understandably difficult to give up control of pieces to anyone that is not 100% bought in like you. But as an accountant, there are a few things that I (and others in my field) would love for you to know that may bring you some peace of mind.

  • Our business is our baby, too.  We wholeheartedly understand.  We have also spent days and nights thinking, strategizing, building up the courage to market ourselves and take that leap of faith.  We know it can be scary. 

  • You need to know when to fire yourself from certain aspects of your business.  Accounting, payroll, and taxes are not about simple math; they are actually quite complex.  Laws and regulations change all the time and your financial allies are the ones who know what the rules are and how they may effect your bottom line.  So, if you find yourself entering months of transactions at a time, ball-parking figures, or “sticking” a purchase somewhere just because it seems like common sense, it may be time to fire yourself and look at a freelance bookkeeper.  

  • Leave payroll up to professionals.  Payroll is the biggest quagmire out there and the IRS knows it.  If you make little mistakes in payroll, it will cost you –  and not just back taxes.  Penalties for late payments, non-payment, etc can rack up quickly and cost you more than having a professional payroll administrator on your team.  Businesses have been forced to close doors and have had their assets seized to pay for payroll taxes they didn’t even know were owed.  Don’t find yourself in this situation.

  • A CPA can do more than prepare taxes and represent you in an audit.  Tax planning and business analysis with a CPA can go along way to help you reach your goals in your business faster and take advantage of all of the loopholes you’ve never even heard about.  Visiting with any financial professional to discuss your vision for the future of your business is a great way to bounce ideas off of people who not only understand the financial implications and work arounds, but also work with other businesses in your industry and can connect you to other professionals that can assist in making your dreams a reality.

  • 20% of small businesses fail within the first 12 months of opening their doors.  That number rises to 50% at the 5 year mark.  If you partner with an accounting professional, your odds of success increase to an astounding 89%!  The biggest reason most small businesses fail is due to financial reasons – poor cash flow, high debt, low sales.  Accountants can help you navigate these waters and call your attention to yellow flags before they become red.  

Letting go is not easy. But know that your accountant is in your corner and can provide so much more than just data entry or tax preparation. We have a wealth of knowledge we would love to share with you just given the opportunity.

My best advice for you in 2016 is to find an accountant you feel comfortable with, and then allow them partner with you (rather than work for you), to help take you to the next level of business ownership.

If you’re motivated to see what an accountant can do for you, feel free to contact us!  

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