Wednesday, February 3, 2016

Avoiding tax hassles in January.

We are still alive here at E&S Entrepreneur Advisors LLC!  It was a hectic couple of months so no time for blogging.  We got all the payroll taxes filed including all the W2s.  The State of Wisconsin changed its requirements so we had to submit the W2s to the SSA by the end of January instead of the end of February as the State required employers to submit the W2s to them by the end of January and it has to be the SSA file.  That added a lot of work for us in January.

We also ran into some snags with 1099 filings as the State of Wisconsin has obviously tightened its screening of 1099 submissions.  What we ran into was the EIN or Wisconsin ID numbers and business names on the 1099s not matching the State of Wisconsin's records.  A few of these were typos on our part which we corrected at no cost to the client, but several were due to the names in the state records not being accurate.  We have several clients who set up their own My Tax Accounts for the state and did it in their personal names instead of their business name.  When we filed the W2s or the 1099s, the state kicked them out because the names didn't match.  We will be working with our clients to fix this, but a lesson for all you new entrepreneurs out there: get expert help setting up your tax accounts.

We also ran into some issues with the W9s our clients have for their service providers.  For years, sole proprietors and single member LLCs obtained EIN for their businesses so they wouldn't have to use their social security numbers on the W9s and other official documents. This was a great way to prevent identity theft.  Unfortunately, the IRS wants to match the dollars on the 1099s to the dollars reported on income tax forms and the numbers used on the income tax forms for sole proprietors and single member LLCs are social security numbers.  So, all you sole proprietors and single member LLCs and all of you who collect W9s from them: they must have the person's social security number on them and that is the number used on the 1099, not the EIN.

For all you newbies: a W9 is a document which lists your name, your business name, address and tax ID number.  It is used for a business to business relationship much like a W4 is used in an employee-employer relationship.  A business is required to send a 1099 form to the state, the IRS and the individual to whom the business has paid $600 or more for services in a year. Service includes rent which many are not aware of.  This must be sent to any provider who is not a corporation so that is why the W9 is important and it is important that it is filled out correctly and completely.  You don't need to send a 1099 if the service provider is an S Corp or C Corp but you do need the W9 on hand to show that is why you didn't send one.  Another tip: this only pertains to providers you paid via check, cash, ACH transfer, bill pay (money came directly out of your bank account).  If you paid with a credit card, you don't have to send the 1099 so if you don't want to bother with 1099s, pay with a credit card!  The best time to get the W9 is when you owe the provider money-tell them you can't pay them until they provide the W9.  That will give them the motivation to provide it to you.  Make sure you look it over and verify that it is a social security number if necessary instead of a EIN.  Social security numbers are 999-99-9999 while EIN are 99-9999999.

Any questions: just ask an expert like us.

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