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Time for the Winter Rally!
On this snowy November day in the valley, most people around you are thinking about plans for the holiday season. This is the time of year for people who do ‘The Books’ to Get Organized!
By January 31, 2011 the following forms will need to be submitted: 1099s to contractors, W-2s to your employees, State & Federal Payroll Tax Reports for Q4 2010, and the 990 Federal Unemployment Tax Report.
In preparation for creating your 1099s, ensure you have W-9s for all the independent contractors you paid $600 or more to in 2010.
#1 Who needs a 1099?
To see who you paid $600 or more to, create the following custom report in QuickBooks:
Go to Reports -> Custom Summary Report
Date = This Fiscal Year to Date
Display Columns by = Total Only
Display Rows by = Vendor
OK
Review the report. Who should get a 1099? It is very important to ensure you are not treating employees as independent contractors. Visit the links below for independent contractor definitions from the IRS and Oregon or contact your tax advisor.
You should have a W-9 on file for all contractors even if you will not pay them $600 or more this year.
From the IRS:
http://www.irs.gov/pub/irs-pdf/p15a.pdf
2. Employee or Independent Contractor? Page 6
From the State:
http://www.filinginoregon.com/pages/forms/business/guides/2011EmployerGuide.pdf
Who is an Independent Contractor? Page 2
#2 Send requests for any additional W-9s that you need.
Include the W-9 form and a request to return the completed form by a specific date. I suggest the due date of 12/20/10 or earlier so you have time to follow up on W-9s that where not returned.
#3 Get ready for those W-9s!
Which account(s) do you use to code independent contractor payments? The accounts you use should be consolidated and consistent. Preferably, you will have an account called Contract Services that you use for most non-employee compensation. Other expense accounts may include Professional Services, Bookkeeping, Accounting, and Website. Ensure that you have separate accounts for Rent and Legal as these contractors have their own box on the 1099: Box 1: Rents, Box 14: Gross Proceeds to Attorney.
Recode entries as needed to consolidate your contractor payment information.
In QuickBooks, ensure accounts are mapped to the 1099 form correctly. To view and update mapping:
In QuickBooks go to Preferences -> Tax: 1099 -> Company Tab -> Yes -> Map Accounts
For each applicable category, select account(s) form drop down menu.
Finally, purchase your 1099 forms soon to ensure you have them when you need them.
The scrooge was a scrooge because he had to complete his bookkeeping before Federal Income Tax reports were due. That’s why he was counting that money.
To make any process as simple and efficient as possible you need to plan ahead. What Supplies and information do you need? What reading & research do you need to do? Before you sit down to do the task do your reading & research to ensure you understand the topic. Test website log in’s and new software applications before you need them.
Add prep tasks to your daily planner to ensure things are not missed or left to the last day. Don’t end up as unhappy as the Scrooge, complete tasks before they are due rather than at the last minute. That way you too can enjoy the holiday season!