The IRS launched its Information Returns Intake System (IRIS) for tax year 2022. Then, starting tax year 2023, if you have 10 or more information returns, you must file them electronically. (Learn more about this in our Changes to the Electronic Filing Requirement in 2024 article.) So how do you know if you should use IRIS or eFile360 to e-file your information returns? Let’s compare the two. As a business owner, CPA, accounting clerk, or HR professional, we know you’re busy, so we’ll cut right to the chase: Pros of IRIS Free service E-file any 1099 form Cons of IRIS Only works with 1099 forms You need an Employer Identification Number (EIN), which you probably have. Requires an IRIS Transmitter Control Code (TCC), which you need to apply for. It can take up to 45 days for your TCC application to be processed. eFile360 vs. IRIS IRISeFile360CostFreeStarting at $4.25 per recipientForms1099s1099s, 1098s, W-2, and ACAIdeal ForBusiness owners, government agencies, software developers, and third-party filersBusiness owners, accounting clerks, CPAs, and HR professionalsGetting StartedMust apply for and receive a TCC, which can take up to 45 days, before e-filingE-file right away, no strings attached The primary difference between choosing eFile360 and IRIS is whether you want the responsibility of e-filing tax forms or if you want to delegate that responsibility to a team of experts who have e-filed various tax forms since 2009. The IRS calls the e-filer a “responsible official,” regardless of whether they are an issuer (meaning you only e-file for your business) or a transmitter (meaning you e-file for your business and other businesses). When to Choose eFile360 for Your E-filing Needs If you need to e-file 1098, ACA, or W-2 forms, or you need to e-file quickly, eFile360 is your best e-filing partner. Whether you need to e-file for your business or for your clients, we provide bulk pricing and all data is …
1099 Write-Offs You Probably Didn’t Know About
We previously shared common 1099 deductions, so in preparation for tax season, we wanted to share 1099 write-offs you probably didn’t know about. 1099 Write-Offs You Probably Didn’t Know About Business startup and organizational costs If you started your business this year, you can write off many expenses associated with starting your business. In business terms, these are known as startup costs. In tax terms, these are known as investigation costs. Startup costs include: Advertising Acquiring an existing business Consultant fees Customer surveys Equipment costs Leasing a business property Market research Product research Site selection costs Wages and salaries for training Similarly, you can also deduct many organizational costs. These are the costs of forming your organization – specifically, a corporation, LLC, or partnership. Organizational costs include: Accounting fees Legal fees Organizational meetings Partnership filing or incorporation fees Temporary directors To deduct the costs above, make sure the fees you are writing off are only applicable to forming your organization. Other accounting or legal fees do not apply here. Cell Phone Costs If you use your cell phone for personal and business purposes, then you can deduct a portion of your cell phone bill costs from your taxes. To do this, estimate the percentage of your cell phone plan that is used for business purposes, and then write off that percentage. You can review your phone usage for a typical month and then average that for the entire year. Commission and Fees Some commissions and fees can be written off. However, when and how they can be deducted varies. Commissions and fees that are considered capital expenses must be amortized, which means spreading them out over 15 years, which includes these types of commissions and fees: Getting a lease on a business property Issuing and selling stock or securities …
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The Versatility of 1099-NEC Deductions
There are several ways to take advantage of 1099-NEC deductions, and they’re not all related to independent contractor work. Let’s discuss the various deductions that can be recorded on Form 1099-NEC. The Main Deduction: Non-Employee Compensation 1099-NEC was recently reinstated in the tax code and process to differentiate non-employee compensation more clearly. If our business paid an independent contractor or freelancer more than $600 during the tax year, you have to give the correct W-9 information to those non-employees so they can use them for their 1099-NEC deductions and reporting. If you are an independent contractor or business that was paid for the work and you are using the 1099-NEC to report your earnings to the IRS, you may also be eligible for the qualified business income deduction. This deduction allows you to take a 20% deduction on pass-through income. Breaking Down Non-Employee Examples Often, when we mention freelancers or independent contractors, a few specific businesses or individuals come to mind: freelance photographers, writers, marketers, and the like, or contractors that include those in the construction or consulting fields. While all of these roles can describe the people you paid for labor who weren’t direct employees of your business, that’s just the tip of the iceberg for 1099-NEC deductions and business relationships. Types of Businesses, Products, and Services Eligible as Non-Employee Compensation Non-employee compensation is used for tax purposes to classify any wages or payments made to those who did work for you or your business – either for a specified temporary basis or for a defined project. Non-employees are typically independent contractors, freelancers, sole proprietors, and self-employed individuals. These can be creative or marketing consultants or freelancers. Some examples of this include things like: Paying a copywriter or editor for their work on monthly blog articles posted to your website …
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How The Relationship Between Form 1099-K & Online Transactions Has Changed
The IRS has recently updated the Form 1099-K guidelines. Here’s what you need to know about how this will affect your online transactions and beyond. 1099-K Changes & How They Affect Everyone Much of the conversation that has been circulating about the new 1099-K thresholds for third-party and online transactions has focused on the impact on the smallest of small businesses. Previously, side hustles and other micro-business ventures were not getting anywhere close to the old $20,000-and-200-transaction minimum used to determine who got these forms and who didn’t. As we’ve mentioned before, the threshold is now set at just $600 – so if any third-party or online transaction (related to business, not personal exchanges) totals reach more than that, the recipient of those funds will need to also get a 1099-K to file with their taxes. These new thresholds are going to generate a tidal wave of new 1099-K filings come tax season 2023. While personal payments don’t count towards these thresholds, we can expect some issues to arise, as freelancers, entrepreneurs, friends, family, and corporate accounts are all coalescing within these apps to pay for everything from your portion of the brunch bill to a company retreat or contractor fees. Who Is Responsible for Filing 1099-K? There is also a bit of confusion about which entities and individuals will have to prepare and file all of these new 1099-K forms. You can rest a little easier knowing that your business (or your personal tax preparer) isn’t responsible for generating these forms. The entities that facilitated the online transactions (or third-party settlement organizations like Venmo, Paypal, etc.) are the ones who must send them to the payee, which is the business or individual that received the funds. Because this is going to be a new and greatly expanded process for these entities, it’s even more important that you and your accounting or tax professionals look over these forms carefully. There …
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IRS Forms 1098 & 1099 Instructions
IRS Forms come with detailed instructions, but they can sometimes be hard to understand if you aren’t a tax expert. Let’s break down some of the general IRS Forms 1098 and 1099 instructions. General Instructions for Information Returns There are several information returns listed in this 31-page general instructions sheet from the IRS for the tax year 2022. And much like the Terms and Conditions pages, IRS instructions aren’t the most exciting or easy-to-read material. They do make it as straightforward as possible, but tax codes are long and tedious, and difficult for veteran tax experts to understand – so the first thing you should remember about how to file IRS forms is that they change often. That’s why having a dedicated resource like eFile360 can be beneficial: you’ll always have a real person to reach out to with questions. The 1098 and 1099 instructions also work for a number of other information returns, like 1096, 1097, 3921, 3922, 5498, and W-2G. You’ll find a table of contents that directs you to the latest changes, who, where, and what to file, and much more. This instructions sheet is now labeled for “continuous use,” which means you can click this IRS link and it should reflect the latest changes for those information returns and the filing process to use. Filing Instructions There are a few big 1099 instructions to pay attention to when you start the filing process for these IRS forms. The first thing to remember is that right now the electronic filing threshold is set at 250 forms. That means if you have 250 or more 1099s, 1098s, etc., to file for the tax year 2022, you must file them electronically. But that’s only for right now. If new instructions or updated articles are shared by the IRS, that threshold could change, which may affect your filing process. It’s best to use electronic filing and organization like the services eFile360 offers, both for accuracy and in case the threshold changes in a way that impacts you or …
1099-MISC, 1099-NEC, 1099-K: What’s the Difference?
The introduction of the 1099-NEC in 2020 has many businesses still stumped about which to file: 1099-MISC, 1099-NEC, or 1099-K. Let’s break them down here quickly. Because there are more than 40 different information returns that businesses and individuals are filing any given year, it’s easy to get lost in them. Each one has been described in detail by the IRS, but that doesn’t mean there won’t be specific cases where you are unsure if someone who did work for you is considered an independent contractor or not, or whether your last Venmo payment to a contractor puts you over the threshold that then requires an information return be filed. Rest assured, eFile360 is here to help. 1099-MISC The Form 1099-MISC is the one you’ll use to report miscellaneous payments you’ve made throughout the year. These miscellaneous payments include, according to the IRS, any of the following that totaled at least $600: Rents Prizes and award Other income payments that don’t include non-employee payments (those are filed on the 1099-NEC, see below) Medical and healthcare payments Proceeds from crop insurance Cash payments for fish and other aquatic life purchased from anyone in the trade or business of catching fish Cash paid from notional principal contract to an individual, partnership, or estate Payments to an attorney Fishing boat proceeds The term “miscellaneous” accurately describes the different payment types and descriptions captured here, and previously was used to report the non-employee payments made to independent contractors, but that is now reported on the newly reinstated 1099-NEC. Because the 1099-MISC is responsible for reporting so many different things, it’s important to know when and if your payments fall in these categories, as there are penalties for incorrect filings. 1099-K 2022 has been a hot year for 1099-K changes. Many tax, business, and payment industry gurus are weighing in on the latest changes and how they …
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