Car Tax Credit

So its nearing April 15th. That dreadful of all days. The Tax Deadline. You know you have a ton on your mind. This is the last thing you want. Well, you are a brave soul You have done this in the past. Many times in the past actually.

So, with a mighty resolution, you decide to get started on your Tax Return this very weekend. You pack your spouse off to a picnic and roll up your sleeves and get ready. You are not afraid of paper, not a bit. You run off to the post office and get all the latest forms and worksheets and sit down at your desk.

So painted below in words is a hypothetical scenario of what would transpire as you head down the glorious path of preparing your Tax Return.

Scenario 1 : HAND-FILLED, SELF-FILED TAX RETURN

You go to the post office and pick up the paper booklet with the tax form.
Now if you are smart you would have gotten every tax form you know – but you did’nt, so you had to make 2 trips to get all the forms you need.
Next… You have to go through the meticulous process of having to fill one box at a time, make sure your entries are okay, make sure you at least copied down everything from your W2 into your . Because each calculation is connected to the next, each box ties to the next. At the end of this painstaking process you arrive at the final number – your refund or the tax you owe.

Next step – Find the right address to mail to. Do you know where to mail your tax return. Well its there, its probably in the instructions to the form. Again scan every word until you get the address. Oh Well Eureka!! You just found it.. congratulations. Now put that in an envelope.

Walk to the post-office make it before midnight on April 15th and make sure you catch the last snail mail train. Because if it leaves, you are in trouble.. BIG trouble!

Well you made it. You rub your hands with joy and pat yourself on the back. Your Tax RETURN IS FINALLY DONE !! Well you just hit the starter to the engine. You just set in motion for the next series of events that will ultimately get you that coveted refund check!

Assuming no postal delays – your tax return will get to the IRS in about 2 business days.
Next your little piece of work, your tax return, will enter a queue until its routed to the correct department. lets give his a day for making this arduous journey.
Next, It gets picked up to be scanned using sophisticated machines called optical scanners which converts your handwritten tax return into a readable computer file.
Hiccup 1: If you hand filled your return with pen and paper, if the scanner cannot recognize your handwriting – then the scanning process will reject – and then it would get put into another queue to be manually processed by a human – lets give 4 to 5 days for this to happen.
Someone will actually read your tax return and then type the contents manually into a computer. At this point your tax return is now a what is called a raw data file.
Now the raw data file will get run through an editing program which will verify the basic details – like did you put in a valid SSN, did you punch in too many zeros in your income eg. you wrote $50000 instead of $5000 in a box on the form.
If everything is okay, Your return which is now computer file will then get put into a database along with millions of other tax payers. Your tax return will join thousands of others who e-filed their tax return at this point.

From this point on – the process should work like greased lightning.

Next a series of computer programs will be run on the database to validate the tax returns.
It will compare the data on your file against what your employers filed. So if you incorrectly entered $15200 on your income but the employer sent in $20,000 the process will pull out your tax return for ’special’ processing.
Also your tax return gets pulled up in a random audit checks. The most brilliant minds in the IRS ought to be designing these computer programs to determine which tax return needs to be pulled up for auditing. Perhaps the holy grail of IRS secrets !
If you pass step 9, and you have a refund, you will be routed to a program that prints
your refund check – give another 1-2 days for this process to complete.
If you elected direct deposit, a pay request will be sent to deposit the money into your bank account (1 day)
If you did not elect direct deposit, your refund check will go for printing (1 day). Then your refund will go to the mailing department to be sent to you (1-2days). After about (2-3 days) of spending time in the USPS, the check should get to you – again via snail mail, the same way you mailed out your tax return.

This was just one tax filing scenario – the one with a happy ending! Did you glean any information from this ? Did you learn how you can do this process more efficiently, or how you can cut your tax preparation costs. Find out more about the tax filing process and the tools and tax preparation tips that will surely save you a lot of grief and save you money!

car donation tax deduction

As the tax filing season draws near tension fills the air and many people tend to get stressed. If you plan your tax filing exercise you can undertake filing of tax returns without getting into a flap.

To ease the process of filing tax returns H & R Block have designed a check list that will not just save time but ensure that you make no mistakes in filling out the tax forms. Keep the list on your PC and use it through the year to stay organized.

To breeze through the tax form filling and filing you need:

1. Personal data:

a. Social security details of the family, yourself, spouse, as well as children and other dependants.

b. Child care provider: Name, address and tax ID as well as Social Security number.

c. Alimony paid: Social Security number.

2. Employment and Income:

o W-2 forms for the current year.

o Unemployment compensation: Forms 1099-G.

o Miscellaneous income including rent: Forms 1099-MISC.

o Partnership, S Corporation, & trust income: Schedules K-1.

o Pension and annuities: Forms 1099R.

o Social Security/RRI benefits: Forms RRB-1099.

o Alimony Received.

o Jury Duty Pay.

o Gambling and lottery winning.

o Prizes and Awards:

o Scholarships and fellowships:

o State and local income tax refunds: Form 1099-G.

3. Homeowner/Renter data

o Residential addresses for this year.

o Mortgage interest: Form 1098.

o Sale of your home or other real estate: Form 1099-S.

o Second Mortgage interest paid.

o Real Estate taxes paid.

o Rent paid during tax year.

o Moving expenses.

4. Financial Assets :

o Interest Income Statements: Form 1099-INT & 1099-OID.

o Dividend Income Statements: Form 1099-DIV.

o Proceeds from Broker Transactions: Form 1099-B.

o Retirement pan Distribution: Form 1099-R

5. Financial Liabilities

* Auto loans and leases (account numbers and car value) for business vehicles.

* Student loan interest paid

* Early withdrawal penalties on CDs and other time deposits

6. Automobiles

* Personal property tax information

7. Expenses

* Gifts to charity (qualified written statement from charity for any single donations of $250 or more)

* Un-reimbursed expenses related to volunteer work

* Un-reimbursed expenses related to your job (travel expenses, uniforms, union dues, subscriptions)

* Investment expenses

* Job-hunting expenses

* Job-related education expenses

* Child care expenses

* Medical Savings Accounts

* Adoption expenses

* Alimony paid

* Tax return preparation expenses and fees

8. Self-employment Data

* Business income: Forms 1099-MISC and/or own records

* Partnership SE income: Schedules K-1

* Business-related expenses: Receipts, other documents & own records

* Farm-related expenses: Receipts, other documents & own records

* Employment taxes & other business taxes paid for current year: Payment records

9. Miscellaneous Tax Documents

* Federal, state & local estimated income tax paid for current year: Estimated tax vouchers, cancelled checks & other payment records

* IRA, Keogh and other retirement plan contributions: If self-employed, identify as for self or employees

* Records to document medical expenses

* Records to document casualty or theft losses

* Records for any other expenditures that may be deductible

* Records for any other revenue or sales of property that may be taxable or reportable

Tax filing can be made easy if you are organized. Make life easy by using tax software. Find out about IRS Free File software providers. In case of expected problems or delays file for an extension, the IRS normally grants around 6 months.

car donation tax deduction

How do some people seem to always pay less tax or get a bigger tax refund than anyone else, while you try everything possible, just to break even? What if you could find a way to get 20%, 30% or even 50% more money on your tax refund, how much money would that be? Hundreds, maybe even thousands of dollars.

If you could learn just one thing that would help you to get more money back at tax time, this is it. Learn how to use more Federal tax deductions and tax credits when you prepare your taxes. When you learn how to find and use the over 350 tax deductions and credits that are available to every taxpayer, you get more money back at tax refund time.

Here are just a few of the over 350 free tax deductions and credits available to you:

Home mortgage interest, real estate taxes, property taxes
Earned income credit, child tax credit, child care credit
Energy tax credits
State and local income taxes
Charitable contributions
Home office deduction
Medical and dental expenses
You could spend a bundle paying a tax accountant to find every tax deduction and credit, but you no longer have to. I’ll show you how you can use tax deductions and credits to give you a triple digit increase in your income tax refund.

Just one tax credit can get you an extra $500

You’ve practiced energy conservation and purchased energy efficient windows and insulation for your house. You can transform this into an (energy tax credit) on your income tax. This is a true tax credit not just a deduction, in other words you can slice up to $500 off of your tax bill or add it to your refund. You can take the energy tax credit on:
Home improvements: windows, high efficiency heating and cooling devices, metal roofs, heat pumps and boilers
Efficient cars: gas and electric, diesel, alternative fuel and fuel cells
Solar energy: solar heaters, photovoltaic systems and fuel cells
Luckily for all of us, there are now free tools on the Internet, to help find more income tax deductions and credits than ever before. This year when tax time rolls around, try searching for those overlooked tax deductions, and make your tax refund bigger than ever!

car donation tax deduction

When tax time comes around people are filled with all types of questions. The one question that keeps coming up is how much money do you have to make to file taxes. It never fells to be a top questions. If you are an employee or you are self employed the rules for filing taxes are different.

For a typical employee you have to file taxes when you earn $3400 or more in a given fiscal year. If you earn less that that you do not have to file taxes. You should file a tax return anyway because you can still get a tax return. No since letting the government money that you have coming to you, right?

If you are self employed on the other hand then you have to file taxes when your income is at least $400. That is minus your cost of expenses you accumulated over the year. Plus being self employed you are going to end up paying the full amount for taxes as employees will pay half and the employer pays the other half.

Now don’t get me wrong, it’s not quite that simple. See there are other factors involved when you answer the question of how much do you have to make to file taxes. There are 3 more factors like your age, filing status, and the type of income you receive.

If you are a minor who makes more than $5,350 then you have to file taxes. Make less and you will not have to. If you file as single you will pay more but if you file head of household then you will pay less. If you are 65 years of age and you collect social security then you don’t have to file. Believe me when I tell you that with all the tax laws out there I could go on and on for ever. But I think you get the general idea.

Regardless of if you need to file taxes or not you should file anyway. The government is not going let you know you could have a refund waiting for you. If you don’t then the government will just keep your money and make big interest off of it. You work are for your money so make sure you get back every dime you are owed.

So I hope the question of how much money do you have to make to file taxes was answered. Remember, the date to file by is April 15th. So start early and don’t put it off until the last minute and end up missing out on your refund.

car donation tax deduction

January starts off with a blissful anticipation of a glorious new year. It quickly turns into a panic as you try to get your finances in order so you can issue 1099-MISC tax forms. Ah, but who do you have issue them to?

The 1099-MISC tax form is an informational tax return of sorts. It tells the IRS who you paid certain monies to during the year. Ostensibly, this information is used to see if the people you report on are reporting the correct amounts of money paid to them. In reality, this process results in tens of millions of 1099-MISC being filed and they are really only looked at if a party is audited. Still, you have to issue them.

Since we are talking about a tax issue, you know it isn’t going to be simple and straightforward and it is not. The rules for who you report on break down along the lines of what profession they are in, how much you paid them and just a few bizarre requirements. Let’s take a look.

1. In general, you must report on any independent contractor you paid $600 or more during the year for services rendered. This is the most common category that people run into. If you paid someone $600 to create a brochure for your business, you file a 1099-MISC.

2. On the weird end of the scale, we have the fish issue. For some reason that I am sure makes sense if you drink enough vodka, you must report anyone to whom you paid more than $600 to during the year for fish. Yes. As in fish you eat. No, you don’t have to report your sushi chef. It is only for monies you pay directly to the person who caught the fish. And the government wonders why people hate dealing with taxes!

3. Another fascinating oddity is the sale of consumer products to a buyer by you. If you sell more than $5,000 worth of consumer product to a buyer who is reselling them, then you have to report him or her. Ah, but there is more. This only has to be done if the buyer does not have a permanent retail establishment. Confused yet?

4. Attorneys take it in the kisser when it comes to 1099-MISC filings. You must report any gross proceeds you paid to an attorney during the year. There is no $600 minimum.

5. The Secret Spy Reporting Requirement. You have to love the IRS. Why? Well, you are also required to file a 1099-MISC for any payments you make to an INFORMANT(!). If you are doing it as a government employee, you do not have to file the 1099-MISC.

Most people think of the 1099-MISC tax form as a simple required document if you made payments to independent contractors. As you can see, it is much more. The above represent only a small sampling of when you must file the form. There are also requirements if you received a prize, award, certain scholarships and so on. Make sure to speak with a CPA in your area if you are concerned.

car donation tax deduction

Donation Request Letter

I believe every individual and nonprofit that wants to have success in writing donation request letters can, and through that, impact the world in significant ways. I believe in nonprofits and the way they can change the world. So, I want to give you the tips on how to make your donation request letters successful so that together we can make the world a better place.

Successfully getting the donations a nonprofit needs, is not hard, but many that run nonprofits have a hard time asking for the contribution. However, writing a donation request letter to friends and business acquaintances can be a little easier, and a successful way to find donations. The letter must be well written and have the necessary information included to get a good response. I would like to help you master the donation request letter with the information below.

Donation Request Specifics

The letter must be appealing to the individual or company that receives the letter while touching them in human terms. An effective way of doing that is by including an example story of how your nonprofit work has helped someone in a positive way. Describe the need the person had and then how you met the need. Through this example, the potential donor can understand the impact their donation can have. Make sure you include a couple of lines on how you expect to use the individual’s donation.

Make sure your donation request looks professional and print it on company letterhead if possible. Keep the letter short and to the point. Focus first on the example story and then on how their donation is going to be used to make an impact. Keep the letter short, the reader focused, and engaged. This is not your usual monthly update that has multiple stories about you and everything the nonprofit is doing. Instead, a letter personally written to the potential donor specifically asking for their support. A couple of well written, personalized donation request letters will have better results than a hundred form letters. Think about what would persuade you to donate in a letter you received. These are real people with real feelings and respect them in that.

Follow-Up on the Donation Request

The finishing touch to a donation request letter is to personally follow-up with each person the letters to whom the letters were written with a phone call. Make a brief phone call to each person and reference the letter you sent while asking for their personal support. Keep the call brief and make sure you ask them about what is going on in their life. If you are not going to follow-up with people, you shouldn’t expect their donation. Throwing a bunch of arrows by hand at a target is not an effective way to hit a bullseye. Neither is mailing a bunch of generic donation request letters to potential donors a successful way of getting donations.

Taking the time to write personal letters to donors with who you want to build relationships is the most successful way to invest time. A letter that genuinely comes from your heart, with an invitation to impact the world in a positive way, and examples already happening will get results. By spending the extra time and energy to write personal donation request letters that share your needs will help you make a better impact on changing the world in a positive way.

Copyright 2011 Scott Michael Ringo

car donation tax deduction

Organizations do not get cash donations only. Many times they get furniture, equipment and other items that are valuable, but are not in form of cash, check or credit cards funds. These types of donations are considered to be in-kind contributions. If an item is expensive, for example $5,000 and over, a formal appraisal may be needed, not just for accounting purposes, but for taxes as well. Often enough donors help to pay for the appraisals because they want the deduction in their income tax returns.

Donated in-kind contributions are booked as expenses and revenues. The journal entry is:

Debit Equipment expense-In-kind 3,000

Credit Donations- In-kind 3,000

Donated in-kind contributions can also be booked as a debit to assets, in the case of items that can be capitalized, usually expensive things. Depending on the assets, they can be depreciated. The journal entry then would be:

Debit Asset- In-kind 10,000

Credit Donations- In-kind 10,000

The other type of in-kind contribution is related to donated services. Per accounting rules, only professional services can be recognized. For example, if volunteers work at special events as ushers and receptionists, their time is not recognized by accounting. However, if a doctor provides services or a lawyer volunteer his time with professional services, then the time is accounted for using a reasonable hourly rate. For example, a CPA may provide high level accounting services for free and an hourly rate of $150 would be reasonable. If an lawyer provides legal services usually billed at $200/hour, but charging the organization only $30/ hour, the difference- $170- is considered in-kind. The journal entry to book this contribution for 10 hours will be:

Debit Legal expenses – In-kind 1,700

Credit Donations- In-kind 1,700

In order to substantiate in-kind services, the professional could send the non-profit a note with his time spent. The organizations could send the professional a thank you note acknowledging his donated time. Note that services donated are not deductible in income tax returns.

car donation tax deduction

In most homes, paper causes clutter. And it seems to mysteriously multiply by itself. But just how long do you need to keep all those receipts, bank and credit card statements and other financial papers? Below is a handy In most homes, paper causes clutter. And it seems to mysteriously multiply by itself. But just how long do you need to keep all those receipts, bank and credit card statements and other financial papers? Below is a handy reference that you can use for dealing with your home paper trail.

Toss after One Month

ATM and bank deposit/withdrawal slips

keep in a file folder until monthly statement received
reconcile with your statement to ensure that charges and payments have been properly processed
if for major purchase with warranty, staple receipt to the owner’s manual and file for the term of the warranty
if for major purchase without warranty, keep receipt if item replacement cost is higher than the deductible on your homeowner’s insurance policy
if for minor purchase without warranty, shred

Cash purchase receipts

enter into your chequebook or computer software to ensure that you are accounting for all your purchases
if for major purchase with warranty, staple to the owner’s manual and file for the term of the warranty
if for major purchase without warranty, keep receipt if item replacement cost is higher than the deductible on your homeowner’s insurance policy
if for minor purchase without warranty, shred

Credit card receipts

keep in file until monthly statement received
reconcile with your statement to ensure charges and payments have been properly processed
if for major purchase with warranty, staple to the owner’s manual and file for the term of the warranty
if for major purchase without warranty, keep receipt if item replacement cost is higher than the deductible on your homeowner’s insurance policy
if for minor purchase without warranty, shred

Toss after One Calendar Year

Bank/Financial Institution monthly statements (unless needed for home business)
Brokerage/Mutual Fund Statements (Monthly/Quarterly)

reconcile with your annual statement

Credit card monthly statements

Credit reports

you should request your credit report annually to ensure that all information is accurate and up-to-date, especially with regard to accounts you have closed in the course of the year
requesting this file annually helps to prevent identity theft, so you can see who has requested the report and for what purpose

Monthly Mortgage Statements

reconcile with your annual statement

Pay stubs

shred after reconciling with your W-2 or 1099 (US) or T4 (Canada)

Telephone/Utility bills

Keep for 7-10 Years

Any T4 Forms – including T4E, etc. (Canada)
Annual Mortgage Statements
Supporting documentation (cancelled cheques/receipts/statements) for tax returns including but not limited to:

donations
retirement account contributions
child care receipts
alimony/child support paid or received
medical expenses
mortgage interest
property tax payments

W-2 or 1099 Forms (US)

Year End statements from Credit cards (if provided)

Year End statements from utility companies (if provided)

Keep Indefinitely

Adoption Records
Auto/Home/Life Insurance policy information

keep purchase records for as long as policy is in force

Automobile Records (ownership certificate/registration)

keep for as long as you own your vehicle
if annual registration required, keep only current registration paper

Birth Certificates

Business Income Tax returns, and supporting documentation, if self-employed

Death Certificate

Divorce Agreement/Child Custody Court Orders

Investment records clearly showing beneficiary information

purchase records
sales records

Marriage Certificate

Medical records

Immunization records to children

Military service records

Pension Plan records

Receipts for major home improvements/renovations

Receipts for major purchases that have long life expectancy (refrigerator, stove, freezer, vehicles)

Religious records

School/Education records

Tax Returns

In the US, the IRS has 3 years to from the date you file your tax return to examine your return for errors and up to 6 years to audit your return if they suspect that you have underreported your gross income by 25% or more. There is no statute of limitations on an audit when deliberate fraud is suspected.
In Canada, CRA advises you to keep your tax returns, Notices of Assessment, and all supporting documentation for 6 years from the date of filing your personal income tax return.
NOTE~I recommend keeping these indefinitely because they take up little space and can often be a valuable resource if there is any dispute over such things as income tax paid, child support/alimony paid or received and pension plan benefits.

Will and/or Power of Attorney

should be kept securely in a fire-proof home safe or safety deposit box at your financial institution

Year End Investment account summaries

Now what?

Now that you know what to keep, where are you supposed to put it all?

Set up a simple home filing system to cover the basics, and invest in a couple of sturdy cardboard or plastic filing boxes for the information you should keep log-term or indefinitely.

And a final caution – when you decide that you no longer need to keep certain documents, make sure you shred them and DO NOT put them in the general trash or recycling. Sensitive financial information or personal information should always be DESTROYED to avoid any chance of identity theft that could lead to headaches greater than you can imagine.

car donation tax deduction

In most homes, paper causes clutter. And it seems to mysteriously multiply by itself. But just how long do you need to keep all those receipts, bank and credit card statements and other financial papers? Below is a handy In most homes, paper causes clutter. And it seems to mysteriously multiply by itself. But just how long do you need to keep all those receipts, bank and credit card statements and other financial papers? Below is a handy reference that you can use for dealing with your home paper trail.

Toss after One Month

ATM and bank deposit/withdrawal slips

keep in a file folder until monthly statement received
reconcile with your statement to ensure that charges and payments have been properly processed
if for major purchase with warranty, staple receipt to the owner’s manual and file for the term of the warranty
if for major purchase without warranty, keep receipt if item replacement cost is higher than the deductible on your homeowner’s insurance policy
if for minor purchase without warranty, shred

Cash purchase receipts

enter into your chequebook or computer software to ensure that you are accounting for all your purchases
if for major purchase with warranty, staple to the owner’s manual and file for the term of the warranty
if for major purchase without warranty, keep receipt if item replacement cost is higher than the deductible on your homeowner’s insurance policy
if for minor purchase without warranty, shred

Credit card receipts

keep in file until monthly statement received
reconcile with your statement to ensure charges and payments have been properly processed
if for major purchase with warranty, staple to the owner’s manual and file for the term of the warranty
if for major purchase without warranty, keep receipt if item replacement cost is higher than the deductible on your homeowner’s insurance policy
if for minor purchase without warranty, shred

Toss after One Calendar Year

Bank/Financial Institution monthly statements (unless needed for home business)
Brokerage/Mutual Fund Statements (Monthly/Quarterly)

reconcile with your annual statement

Credit card monthly statements

Credit reports

you should request your credit report annually to ensure that all information is accurate and up-to-date, especially with regard to accounts you have closed in the course of the year
requesting this file annually helps to prevent identity theft, so you can see who has requested the report and for what purpose

Monthly Mortgage Statements

reconcile with your annual statement

Pay stubs

shred after reconciling with your W-2 or 1099 (US) or T4 (Canada)

Telephone/Utility bills

Keep for 7-10 Years

Any T4 Forms – including T4E, etc. (Canada)
Annual Mortgage Statements
Supporting documentation (cancelled cheques/receipts/statements) for tax returns including but not limited to:

donations
retirement account contributions
child care receipts
alimony/child support paid or received
medical expenses
mortgage interest
property tax payments

W-2 or 1099 Forms (US)

Year End statements from Credit cards (if provided)

Year End statements from utility companies (if provided)

Keep Indefinitely

Adoption Records
Auto/Home/Life Insurance policy information

keep purchase records for as long as policy is in force

Automobile Records (ownership certificate/registration)

keep for as long as you own your vehicle
if annual registration required, keep only current registration paper

Birth Certificates

Business Income Tax returns, and supporting documentation, if self-employed

Death Certificate

Divorce Agreement/Child Custody Court Orders

Investment records clearly showing beneficiary information

purchase records
sales records

Marriage Certificate

Medical records

Immunization records to children

Military service records

Pension Plan records

Receipts for major home improvements/renovations

Receipts for major purchases that have long life expectancy (refrigerator, stove, freezer, vehicles)

Religious records

School/Education records

Tax Returns

In the US, the IRS has 3 years to from the date you file your tax return to examine your return for errors and up to 6 years to audit your return if they suspect that you have underreported your gross income by 25% or more. There is no statute of limitations on an audit when deliberate fraud is suspected.
In Canada, CRA advises you to keep your tax returns, Notices of Assessment, and all supporting documentation for 6 years from the date of filing your personal income tax return.
NOTE~I recommend keeping these indefinitely because they take up little space and can often be a valuable resource if there is any dispute over such things as income tax paid, child support/alimony paid or received and pension plan benefits.

Will and/or Power of Attorney

should be kept securely in a fire-proof home safe or safety deposit box at your financial institution

Year End Investment account summaries

Now what?

Now that you know what to keep, where are you supposed to put it all?

Set up a simple home filing system to cover the basics, and invest in a couple of sturdy cardboard or plastic filing boxes for the information you should keep log-term or indefinitely.

And a final caution – when you decide that you no longer need to keep certain documents, make sure you shred them and DO NOT put them in the general trash or recycling. Sensitive financial information or personal information should always be DESTROYED to avoid any chance of identity theft that could lead to headaches greater than you can imagine.

car donation tax deduction

Virtually every tax rule has a potentially long list of exceptions, limitations and otherwise mind-boggling list of finer points. Such is the case with the Form 1099-MISC reporting requirements. Ask a simple question: To whom am I required to send a Form 1099-MISC? Get a simple answer: Read the 8-page document entitled “Instructions for Form 1099-MISC” and watch your head spin.

What’s a small business owner to do? The purpose of this article is to give you an introduction to the wild and wacky world of Form 1099-MISC do’s and don’ts. Even then, this article will focus only on who gets a 1099-MISC for “non-employee compensation” that gets reported in Box 7.

Let’s start with the basics. Fortunately, there are two basic rules that are somewhat easy to understand:

1. Only report payments to a given individual when the annual total is $600 or greater.

2. Only report payments made for services rendered to you in the course of your trade or business. Personal payments are not to be reported. Example: you can forget about payments to your lawn care man or other independent contractor who works on your home (electrician, plumber, appliance repairman, handyman, etc). But if you hire an accountant or attorney to do work for your business, and annual total is $600 or more, then you’ve got to issue a 1099-MISC to that service provider.

Now comes the fun part. There are many exceptions to the above general rules. For example, there’s a long list of payments for which a 1099-MISC is not required, such as:

1. Payments to a corporation. Sole Proprietors, independent contractors, and self-employed people are the folks the IRS is trying to keep an eye on here.

2. Payments for merchandise. The main concern is services rendered not products sold.

3. Payments of rent to real estate agents.

4. Payments of wages to employees. Those go on Form W-2.

And then there are exceptions to the exceptions. For example, generally speaking, payments to corporations are excluded. But there are certain payments to corporations that should be reported on 1099-MISC, such as:

1. Medical and health care payments (these go in Box 6, not Box 7)

2. Fish purchases for cash. (See the next paragraph for more amazing facts about this one).

3. Attorney’s fees. (Doesn’t that one make you smile?)

And then there are aspects to 1099-MISC that are just plain fishy! Note that even though the main concern of Form 1099-MISC is payments for services rather than products, if you are in the fish business and purchase fish for resale, you are required to report annual cash payments of $600 or more to anyone who is in the business of catching fish. Cash payments include the following: coin, currency, cashier’s check, bank draft, traveler’s check, or money order. A cash payment does not include a check written against your personal or business account.

car donation tax deduction