Did you know that ALL businesses are required to report certain payments to vendors on form 1099 each year? The IRS may penalize you for failing to file or filing incomplete or inaccurate 1099s. The penalties have increased for 2011 and range $30 - $250 per faulty 1099. Most payments to corporations are not subject to 1099 reporting, however all payments for legal fees are reportable whether or not the vendor is a corporation.

The reporting requirement applies to total payments during 2010 of:
• $600 or more for services or rent
• More than $10 or more for royalties
• More than $5,000 or more in direct sales to a reseller, or
• Any amount of gross proceeds from a legal settlement to an attorney

Review your 1099 vendor information prior to the end of the year to allow yourself time to correct your records before the reporting deadline. You will need to report the vendor's legal name, tax ID number and complete address on the form. Provide the vendor with a W-9 form to collect information you don�t already have. If a vendor fails or refuses to provide the information you must withhold 28% tax from future payments until the complete information is received.

Completed 1099�s must be provided to recipients before February 1, 2011. Form 1096 and a copy of each 1099 is required to be filed with the IRS before March 1, 2011 (the staggered filing deadlines allows time to correct any vendor information before filing with the IRS). If you prefer to electronically file your 1096, you will receive an automatic extension to electronically file the 1096 until March 31, 2011.

Let us know if you would like help filing these returns.

Paying your business and personal taxes electronically is safe and easy using the Electronic Federal Tax Payment System (EFTPS). Many tax payments are now reqiured to be made this way. This service is free service, payments can be made over the phone or online. The payment is quickly credited to your account and a receipt can be printed for online payments.
Enrolling in EFTPS and paying taxes by phone or online is easy. You can register at www.eftps.gov

IRS released the 2011 tax rate tables and other inflation adjustments which it had been holding while waiting for Congress to resolve various tax issues. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (Tax Relief Act of 2010) extended the 2001 and 2003 tax rates continuing the 10%, 15%, 25%, 33% and 35% tax brackets and various expired and expiring provisions.

See the details of 2010 Tax Changes for Individuals and 2010 Tax Changes for Businesses.

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