Your U.S. Small Business and Tax Information Forms

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Super Bowl XLIX on Sunday had some excitement early in the game, and so I watched the last three quarters. (Katy Perry’s half-time show was spectacular!) Regardless of who you wanted to win, the 4th quarter pass strategy by the Seahawks was sad. Because they were so close, passing was just a bad decision at that point in the game. If the pass had succeeded, it might have been a good play or even a spectacular play, but would it really have been a wise play for that point in the game? A better play would probably have been to push through.

And that’s the way it often is for your small business. Sometimes you just have to push through, instead of passing. For me, working on my business is one of those “just push through” areas. Because of that, I’m working to learn more about all aspects of my business this year, and this is some information I’ve learned about U.S. business and informational tax forms.

[I’m not a lawyer or financial or tax expert, so this is information for educational purposes, and not tax advice; please consult your own accountant or tax advisor.]

SBA Website

One of the best resources for small businesses in the United States is the U.S. Small Business Administration website.This site is full of information, regardless of your small business structure. The Search on the site is quite effective, although you may need to read through several articles before finding just the information you need.

One of my favorite sections is “Business Guide – Manage Your Business“, just because it’s such a great resource for links to other information. The links here apply to many types of small business, not just freelancers, and if you follow the links, there is usually information that applies whether your business structure is a sole proprietorship, a partnership, or a limited liability company.

Make Quarterly Estimated Tax Payments

It’s important if you are self-employed to make quarterly estimated tax payments. Here is the IRS Self-Employed Individuals Tax Center page. On that page is a link to 1040-ES which has a short worksheet to help with this. My Money Blog has more information, dates for 2015, and how to set up online payments.

Using an EIN

If you are a sole-proprietorship, you may be able to use your personal Social Security Number (SSN) for your business, but do you really want to? You can get an Employer Identification Number (EIN) to use instead. Using an EIN will keep you from having to share your personal SSN with other businesses. You apply for an EIN online on the IRS website during normal business hours, and you can receive your number immediately. You can use the EIN on your invoices, and Form W-9s (see below).

When to File 1099-MISC Forms

If you are a business owner in the U.S., you will often hire independent contractors or service providers, or even attorneys. You have probably been told that you need to send a 1099-MISC, if you paid an independent service provider more than a total of $600 in a year (total of $600 can be made with multiple payments). You may also be sent 1099-MISC forms by your clients, if they paid you more than $600 in a year. You can find the IRS Instructions for 1099-MISC here.

It is important to note that the method of payment used makes a difference in whether the forms are actually required.

Small Business Trends has an informative and easy-to-read explanation in their updated article for 2015. The information that was most helpful to me was:

If you paid unincorporated businesses or independent workers electronically, such as through PayPal or a credit card, then you are not required to issue a 1099-MISC to that payee.

The IRS Instructions for 1099-MISC also says the same thing; it is below heading “Form 1099-K”, and not under “Exceptions”:

Form 1099-K.
Payments made with a credit card or payment card and certain other types of payments, including third party network transactions, must be reported on Form 1099-K by the payment settlement entity under section 6050W and are not subject to reporting on Form 1099-MISC. See the separate Instructions for Form 1099-K.

If you use a tax accountant for your business, you can have them issue any required 1099-MISC for you.

My Money Blog tells you how to issue your own, if you do your own taxes. You will need to fill out an original (scannable) 1099-MISC information form. You can order forms from the IRS or purchase them at an office supply store or use business tax preparation software, like TurboTax (I don’t know about others).

Form W-9

If you do pay a service provider more than $600 by check, you would send them a Form W-9, Request for Taxpayer Identification Number (TIN) and Certification to obtain their complete business name, address, and TIN, to make sure you have the correct information to add to the IRS information form. If you have been sent a Form W-9 to complete, you can use your EIN for your business, instead of your personal SSN.

What If You Were Not Sent a 1099-MISC?

I found mixed advice on what do if you did not receive a 1099-MISC, so you will need to read for yourself and decide. Some said to do nothing, and others said to request that a form be sent. At any rate, you will need to include the income you received on your tax return.

Disclaimer:  The information in this article is for general educational purposes only; it is not tax advice, and should not be used as such.

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Comments

5 responses to “Your U.S. Small Business and Tax Information Forms”

  1. Great intro Marcy! It actually got my attention so that I would read the rest of the boring (but important) stuff ;-) Thank you!

  2. Thank you Marcy, this is a great roundup of resources. I had no idea about electronic payments and the 1099-MISC form. Good resources!

    • Marcy Diaz says:

      You’re welcome, Deborah! I didn’t know about the electronic payments and the 1099-MISC either; that was partly why I wanted to share. I think reading and deciding what to do if you don’t receive one is important too.

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