May 9th, 2024

What The IRS Has In Store For Us

There are several changes to the Tax Code that IRS is pushing that would affect small business.

  1. Change in 1099 threshold amount.

Right now companies are required to send a 1099 to sole proprietors and LLC’s that are paid $600.00 or more.

IRS has pushed through the House a change in this threshold upwards to $1000.00.

How this might affect you is if you have certain vendors that have been paid up to $999.00 by your company, you will not have to issue a 1099 for them.

Less 1099’s is a good thing.

This proposal has made it through the House but not the Senate at this time.  Watch for HR 7024 on Google.

  1. This is the year the online sales reporting comes into effect.

If you use online paying for your services, the threshold has been $20,000 and 200 transactions.  As of 2024, the new regulation is $600.00 period.  This means a 1099-K will be issued to anyone with revenue over $599.00 through credit card services.

This may affect some of you that regularly use Stripe, Vagaro, your bank’s credit card processing system, or other credit card swipe systems.  Plan on getting a 1099-K from your credit card this year.

  1. For those of you who have not been paying quarterly estimate taxes, be aware that the calculation for fines and penalties is now much greater.

Now, the calculation works like this:  If you owe taxes at the end of the year, the IRS takes one-fourth of the amount and divides the amount up into payments you SHOULD HAVE MADE each quarter.  Then they calculate a DAILY RATE for the amount you shouldn’t have paid, and this is CUMULATIVE.

In other words, if you owed $1.00 in penalties on April 16, that $1.00 is added to the base tax amount, and the new interest for April 17 is calculated with the additional $1.00 in the base rate.  Then on April 18, the $1.00 PLUS the added $1.00 for April 16 is added to the base rate for the calculation for April 18.  And this would go on until the day you pay your tax.  For some of you, that payment date has been the next year on April 15.  I can see the fines and penalties being more than the base tax amount.

We are highly recommending that you reconsider paying quarterly taxes ON TIME.

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