One IRS publication that explains some of the concerns
in moderately easy to understand language is available
free for the asking from the IRS. It is called Tax Guide
for Farmers. Does explain who a farmer needs to give
a 1099 to (which is similar to who a horse business would
need to give a 1099 to). It is available online or you can
get a paper copy simply by requesting it.
for anyone who is in business, you need to file a 1099 to any service provider, including lawyers. You must report any vendor in which you pay over 600.00
Generally you dont need to give 1099s to vendors you buy merchandise from - only service providers.
note however that if you pay your vendors via a credit card - the 1099 will be issued by the credit card company.
also, this year ALL lawyers need to be 1099'd even if they are corporations. And it is best each year to check and see if the need to 1099 corporations has been included.
It doesn't hurt to 1099 a corp so if you aren't sure it is best to send a 1099.
also, for vendors that charge you for re-reimbursed expenses - it is up to you to either include or not include these amounts - however, if you do 1099 for them be sure you get the original receipts.
also, for some crazy reason you cant use a PDF version of the 1099 form so you need to buy them or call the IRS and have them send you some or you can pick them up at any local federal building.
if anyone has any questions please feel free to PM me. :) i do accounting & bookkeeping for small businesses and i am right in the middle of doing 1099s!
So, then how do you deal with farriers (cost of shoes/nails/etc) or vet bills, or is that their problem on their own taxes? And are you talking only of business vs sole proprietors with a sch C.?
well.... if it were me, and the Vet wasnt a Corp, i would be 1099ing them for all service call charges.... so if they charged you 100 for the call charge and say 245 for meds, i would book the call charge to a 1099 account and the meds to something else.
or you can just 1099 them for everything (which is easier) and let them work it out :)
btw my guess is that 99.9% of vets are Corporations so they wont get 1099s then.... as for farriers - again send them a 1099 for all fees paid....
just to be clear ALL businesses - no matter what type MUST file 1099s to ALL service providers - no matter the type - except if the service provider is a corporation and Corps dont get 1099s
unless of course they are lawyers and lawyers DO get 1099s for everything no matter what type of company they are :)
The instructions from the IRS are very easy to understand and you should read them... all business owners should :)
Stay tuned. Maybe next week we will have a poll on who hires illegal aliens and/or pays workers "under the table." :lol:
Originally Posted by MysticOakRanch
Not correct- anyone who performs a service for you and is not incorporated (or a non-profit or gov't agency - they are also exempt) gets a 1099 if they earn more then $600/year (again, there are some very unique exceptions) IF THEY BILL YOU for goods and services separately, you can send the 1099 for just the service cost, but most contractors don't bill separately, so you 1099 the entire amount.
Originally Posted by ideayoda
If you do it incorrectly or don't do it at all, and IRS catches you, then you are assessed fines and penalties. If they SHOULD have been paid as an employee (such as a full time stall cleaner/barn worker), then you may also be liable for their back payroll taxes. Depending on your state taxing authority, they may also be watching for this.
If you are wondering if you should be filing 1099s, ask your tax accountant, don't take tax advice from this bulletin board - there is WAY too much mis-information going on here to risk IRS penalties. Telling an IRS agent you followed the advice of COTH will not save you.
As I noted above, if they itemize their bills to you, then you can just 1099 the service cost (if the non-service cost are substantial and substantiated). Same with trainers. And in your case, as a judge - if you bill the show management and split out the travel expense reimbursement separately, then they don't have to 1099 the travel costs.
Originally Posted by ideayoda
Well, the general gist of this is kind of correct. No one is registered as a 1099 - if "you" are operating as a business, you are either a sole proprieter (often DBA, aka doing business as), or you are a partnership (with multiple people involved and a formal partnership agreement), or you are incorporated (which means you've filed articles of incorporation and pay for that privilege every year). LLC is a form of corporation (limited liability corporation). So no one "is a 1099", but if they are NOT a corporation, they should get 1099s. No one has to inform you - as the contractor who is paying for services, you have an obligation to obtain a W-9 and issue 1099s. The contractee has an obligation to provide you with a completed 1099, including a tax payer identification number (which is probably their social security number). And some of them do get a little edgy about that - I had a farrier quit when I asked!
Originally Posted by DangerHorse
I am self employed and a CPA and run a small breeding farm - so I deal with it from all sides.
BTW - 1099s are due on Jan 31 each year - so this is a timely discussion. If you are a business, whether it is a boarding business, a breeding business, a trainer, etc - and you pay anyone for services and are deducting those costs, then you should be issuing 1099s. Doesn't matter what kind of business YOU are - corporation, partnership, sole proprieter, LLC, you have this responsibility. Right up there with filing income tax returns.
Another BTW - if you are NOT a business - aka you own a single horse, it is your hobby, you don't have to worry about this thread:D
Most equine (service) professionals (vets/farriers) I know are incorporated (in some form) so my confusion. And yep, judges/tds/etc do get 1099s.
if the service is not a corporation we file 1099-MISC for any payment ... hell I just love to flood the government with papers as they seem to enjoy sending me all sorts of trash... our one chicken qualified us as poultry operation
also, just to clarify one thing: MOST companies will 1099 a vendor for all amounts paid - including any material/reimbursed expense costs. it just makes booking the expenses easier and in most instances it is an ok way to go.
so for example if say a photographer billed me 1000.00 for shoot fee and 500 for expenses.... i would 1099 them for the entire amount and request copies of the receipts for backup.
last time i spoke with the IRS (please do call them if you have questions) they said it is ok to do it either way (1099 for total cost or split out reimbursable expenses) and if you 1099 for expenses be sure to get copies of receipts.
also, to make this easier on you, be sure to get complete info on a vendor when you write the first check (or get the first invoice) full tax id number, name address etc.
Be sure to file the vendor copy of your 1099s by the end of this month and the 1096 by the end of Feb. I generally wait a few weeks to file the 1096 in case any vendor has questions etc so that if changes are needed you don't have to file a corrected 1099/1096.
this all sounds much more complicated that it really is :) you can sum it up:
a) 1099 all vendors (except corps & non profits) who provide services.
b) 1099 all amounts paid to any vendor that you paid over 600 in a calendar year.
c) For attorneys 1099 no matter what kind of Biz entity they are.
d)be sure to do it before the end of Jan then wait a couple weeks then
e)file your 1096 before the end of Feb.
disclaimer: i am not the IRS so please do contact your accounting professional if you have questions - There were also several IRS links provided above..
Yep, that is correct!
Originally Posted by mbm
And, my other advice I give people - when in doubt, send a 1099. If you aren't sure, send it. I've never met a farrier that was incorporated. Very few trainers are incorporated, and less then half the vets I know are incorporated (generally, the big vet clinics are, or are part of a university). None of the equine chiropractors I know are incorporated, and none of the photographers and videographers I know are incorporated. So it is a vast body of service providers who are generally NOT incorporated. If the business name says "Inc." or "Incorporated" in the name, then they are probably incorporated, and if not, they are not.
I have to admit, I'm a little surprised at the results of the poll. I wish I could ask the question about submitting sales tax for horse sales, but that varies by State. Within California, sales of a horse is subject to sales tax too, speaking of tax issues!
Non employee compensation includes;
"Payment for services, including payment for parts or materials used to perform the services if supplying the parts or materials was incidental to providing the service. For example, report the total insurance company payments to an auto repair shop under a repair contract showing an amount for labor and another amount for parts, if furnishing parts was incidental to repairing the auto."
from the link posted above to INSTRUCTIONS for the 1099 Misc.
Try reading the instructions, thereby avoiding pissing off your suppliers
Originally Posted by clanter
A LLC is NOT a corporation. It is a limited liability company. It is a different type of entity with different rules.
Originally Posted by MysticOakRanch
I think this all goes back to an Off Topic Day thread when I was whining about my longstanding pet peeve. NO ONE pays what they should in taxes in this country whether it is millionaires or waitstaff, and we are all complicit in it. So much so that tax evasion and tax avoidance are synonymous. It is the national pastime! I guess this poll continues to make my point.
Originally Posted by MysticOakRanch
Thanks everyone for the replies. It is interesting to see the varying responses. I certainly hope those responding to the poll are actually running their horse operation as a business - replies from "hobbyists" will totally skew the results.
FWIW, here is the Farmer's Tax Guide Robin referred to:
And I have additional poll questions that I will put up in the coming days.
Also - is there anyone else besides MysticOakRanch posting on this thread that is a CPA?
Hey - great idea! Maybe I will throw that one up there too in the coming weeks! LOL!
Originally Posted by Eclectic Horseman
You're right - it is a company that combines Corporation and non-corporation rules. Sorry ;) Mea culpa. I go back to Inc. or Incorporated in the title is the clue!
Originally Posted by DPIAm
I might add - being a CPA doesn't make one an expert - many bookkeepers and business consultants and attorneys can also provide good information in this area.
Originally Posted by DownYonder
just one note: to actually collect and pay the state sales tax you need to have a resale certificate. i dont think the state would want to initiate those to just the average joe.
remember also that a resale certificate allows you to buy things that you are going to resell without paying sales tax.
think of all the "stuff" that gets sold every single day - just look at craigslist alone.... i think if you asked the BOE they would say that only businesses should collect sales tax.
i dont think there is any way to regulate peer to peer sales and so therefore it is not tax fraud or avoidance for that matter.
mbm - you are right, if someone is just selling a single horse, it isn't such an issue. But most people on this poll are running a business, and if your business includes selling horses (breeder, some trainers), then you do need a sellers permit, and to remit sales tax, at least in the State of California. Sales tax (unlike 1099s) are a state issue - every state has different requirements. The SBOE will most definately issue a resale permit to anyone who is in business! There are specific exceptions in Cali for "irregular and infrequent" sales - thus Craigslist, garage sales, ocassional eBay sales are not an issue. But for a person who is in business to sell - anything - this is another area to look into. I am a breeder - some years, I only sell 2 horses, others years, 6 or 8. I know of a few other breeders and a few sales barns who are also in compliance with this state tax requirement. And many who are out of compliance. I can't comment on other states, but it is one more potential reporting requirement that people need to be aware of.
Originally Posted by mbm
^ yep! anyone in business to buy and sell needs a resale cert! :) us non biz folks don't :)
also, for those that will get a new ressale cert the BOE *may* require a deposit on your account.... that can be a hardship for some so just be aware it might happen.