The controversial Health Care Reform Bill that was passed last year came loaded with all sorts of new laws hidden within its 2400+ pages. Many of you who use Homestead’s SiteBuilder program are designing sites as a business and that means these new laws apply to you.
Form 1099-Misc has been a requirement for a number of years for services rendered by an independent contractor in a business to business situation. When you design a site or do maintenance on a site for another business THEY should issue you a Form 1099-Misc if you receive $599 or more from them in a given year for your services.
The reverse is also true. If you pay another business over $599 for services that relate to your website design business you need to issue them a form W-9 to get their Tax ID number, etc. and provide them with a copy of a completed 1099-Misc form.
Beginning December 31, 2012, thanks to even more sneaky tactics when the bill was drafted, businesses will be required to obtain W-9 information and file 1099s for not only services but GOODS as well. That means you will need to issue a W-9 for the 1099 form anytime you purchase a product related to your business that is over the established limit. New computer from Best Buy? You’ll need to ask for their information. If your office supply purchases are in excess of the $599 threshold from any one business – 1099, if you claim a portion of your utilities phone, internet, etc. for your business and the amount exceeds the limit – 1099s will need to be issued. And on and on …… Try to get in the habit of issuing a W-9 prior to paying for goods or services.
The whole point of this is so the IRS can compare reported income against issued W-9s in the hopes of collecting unreported income. And as is usual, the wording is ambiguous and about as clear as mud. There are of course penalties if you don’t comply.
The good news is that some lawmakers in Congress are currently making attempts to repeal and or modify the new laws attached to Form 1099-Misc.
As a web site designer you need to be heads up and make sure you are in compliance with the laws that are currently in effect for tax year 2011. Consult with an accountant or tax attorney for assistance in what information you need to be collecting, receiving and reporting.