Posted by DC_FL on 12/5/05 9:32pm
Msg #80471

??1099 in the state of florida

How much do you need to make with a company in order to receive a 1099 and to get all of those wonderful write offs on your taxes? Thanks.

Reply by Brenda_NC on 12/5/05 9:47pm
Msg #80473

A company is supposed to issue a 1099 for anyone who makes over $600.00. They are not required to issue one if it is less than $600.00, however you would be required to claim the income even if you do not receive a 1099.

Reply by TitleGalCA on 12/5/05 9:48pm
Msg #80474

Although you didn't ask for California - here it is $600. Perhaps because the 1099 is a federal form it is the same - I'm not sure. There are several tax-saavy notaries on the board who can answer better than I.

Reply by John_NorCal on 12/5/05 9:55pm
Msg #80477

Re: Brenda and TitleGalCa are...................

absolutely correct. A 1099 is not state specific, it is a federal form. As for deductions, keep track of everything, mileage, supplies, etc. and you can start deducting out the gate. Keep one thing in mind, deductions are indeed great and warranted, but it's the income that counts! Deductions are never dollar for dollar, depending on your tax bracket you may get 25 cents for every dollar you deduct Concentrate on getting a reasonable return on your investment and being paid what you're worth!

Reply by Jenny_CA on 12/5/05 10:07pm
Msg #80482

Re: Deductions...................

I have a friend who is going to claim her " No shows" ( people that didn't show up after it had been scheduled) as income loss. She only works for TCs and at their locations. Aside from being a SA she is also an accountant.

Reply by John_NorCal on 12/5/05 10:11pm
Msg #80485

Re: Deductions...................

I'd like to know how she can do that! This is a cash basis business, hopefully. To claim "no shows" as income lost, she would have to be on an accrual basis. She can claim her expenses that are directly related to her "no show" lost income, such as doc printing, travel, etc. But to claim the income lost.............that's a real stretch and a bit of creative accounting!

Reply by Jenny_CA on 12/5/05 10:18pm
Msg #80489

Re: Deductions...................

I'll call her tomorrow and ask. She mentioned one time that it's considered loss of income because she set that time aside and she could have met with someone else. She does keep very busy with the TCs. They have everything ready for her... she shows up, presents the docs, notarizes and she's done.

Reply by taxpro on 12/6/05 2:18pm
Msg #80652

Re: Deductions...................

Sorry, but you cannot deduct lost income, unless you are on the accrual basis and have already counted it as income. Then you are just deducting it back off, to correct it. In the case of a no-show, you wouldn't have ever entered it as income anyway.

Lost time is not deductible, period. However, you can still deduct the cost of the supplies, etc, for printing the docs, or whatever actual cost you incurred for the no-show.

P.S. Not all accountants are knowledgeable about tax law.

Reply by Bob_Chicago on 12/5/05 11:19pm
Msg #80500

Check with tax expert, but as I understand it..............

People in our type of business usually fill
out a Schedule C for their business incorme
You take total $ recd from notary/signing sources and
then deduct expenses (eg: supplies, mileage at
allowable rate/mile, telephone, etc.
Income less allowable expenses in your net business income
If you use a cash basis , as most do, you can not
deduct money you do not receive, either from
non-payment of fees earned nor what you would have made
if a bwr did not stand you up, did not sign etc.
If you receive it , then it is income, and if you spend it for
business then it is deductable.

Reply by JD_inMD on 12/6/05 5:31am
Msg #80509

Re: Check with tax expert, but as I understand it..............

John is right. From IRS publication 535 page 42:

Cash method.If you use the cash method of accounting,you generally report income when you recieve payment. You cannot take a bad debt deduction for amounts owed to you because you never included those amounts in income. For example, a cash basis architect cannot take a bad debt deduction if a client does not pay the bill because the architects fee was not previously included in income.

Reply by Beth/MD on 12/6/05 7:32am
Msg #80514

Re: Check with tax expert, but as I understand it..............

Cash method of accounting isn't the only way to do business. There's another method, I don't remember the name, but the method counts your business as it happens, not as you're paid. It's that method that allows for deducting a loss of income. This loss includes bad debts.

Reply by JD_inMD on 12/6/05 8:14am
Msg #80522

Re: Check with tax expert, but as I understand it..............

Other method of accounting is called accrual, you are right, that allows for taking a bad business deduction. Accrual method is required when there are inventory purchases and sales. Accounts payable and accounts receivable books must be maintained for accrual method taxpayers. Majority of taxpayers who are not required to use accrual method use the cash method.

Reply by PAW_Fl on 12/6/05 8:19am
Msg #80525

Re: Check with tax expert, but as I understand it...........

It's called accrual accounting. That's the way I do business. You claim income when it is generated, but not necessarily paid. In these cases you can deduct the loss of income (up to the amount claimed) if you are not paid.

For example, I do a signing for XYZ company and submit an invoice for $200, which includes travel expenses, printing, etc., but profit. For whatever reason, I am not paid for the signing, I can then show the loss of income ($200 minus actual business expenses) because it is income than was not realized.

In accrual accounting, you count your income when you generate it. With cash accounting, you count your income when you actually receive it. It wouldn't be fair if you were using accrual accounting and didn't get paid for a job, not to be able to deduct it from what you thought you were to receive. Likewise, it wouldn't be fair to deduct what you think you should have gotten if you didn't get paid for it in the first place.

Reply by CarolynCO on 12/6/05 8:36am
Msg #80531

Re: I additionally use accrual accounting

Reply by PAW_Fl on 12/6/05 8:47am
Msg #80536

Re: I additionally use accrual accounting

Actually, since I invoice each and every job (Quickbooks), I find the accrual method easier since all the invoiced amounts are income. Then I only need to track actual expenses (bills) and deduct for invoices that are never paid. Sometimes the 'bad debt' deduction comes in handy, but since it doesn't happen too frequently and very, very rarely across fiscal years, it's just a matter of bookkeeping.

As Bob said, to each his own. I do think its a matter of personal choice, except when you must use accrual. One thing to remember, is once the accounting method is established, you can't change it mid-stream.

Reply by JD_inMD on 12/6/05 8:52am
Msg #80541

Re: I additionally use accrual accounting

Actually you can apply for a change in accounting methods by filing form 3115.

Reply by CarolynCO on 12/6/05 8:56am
Msg #80543

Re: I additionally use accrual accounting

I don't know about Paul, but I've been quite happy using accrual since 1992.

Reply by PAW_Fl on 12/6/05 9:36am
Msg #80558

Re: I additionally use accrual accounting

Yes, you can apply, but, as I was told, do not expect to get it approved. Though I have not done it, my CPA told me that once it is set, it takes an act of Congress (figuratively speaking) to get it changed. The IRS doesn't like changes.

Reply by CrystalT_FL on 12/6/05 9:50am
Msg #80566

Re: I additionally use accrual accounting

Going from cash to accrual is easy, but going from accrual to cash is tricky. The IRS doesnt want you to deduct expenses twice. (For example, you accrued for an expense that you incurred, but havent actually paid for yet. Then, after switching methods, you claim the expense again when you actually pay for it.) Although they probably wouldnt care if you claimed income twice haha. For small businesses like ours, the effects arent huge, but for a large business it gets a little more profitable to "double dip" when changing accounting methods back and forth.

Reply by JD_inMD on 12/6/05 10:38am
Msg #80581

Re: I additionally use accrual accounting

If you are changing from cash to accrual it is an automatic consent to change if you file form 3115. ( see revenue procedure 2002-9 modified by revenue procedure 2002-19 and announcement 2004-16). If the change is not automatic and you have gross income of more than $1million a fee of $1500 applies to change, and if you have gross income of less than $1 million you qualify for a reduced user of fee of $500 to change. (see revenue procedure 2004-1 updated annually rof more information about user fees.) There is no fee for filing form 3115 if you qualify for automatic consent.

Reply by CrystalT_FL on 12/6/05 9:38am
Msg #80559

Re: Im a tax preparer

PAW is correct. You can only write off "bad debt" in an accrual system, only after you have claimed the income. The net effect on taxable income is a "wash" as the invoice and write off cancel each other out. You cant write off bad debt in a cash based system, as you wouldnt recognize the income at the time of invoicing but rather when you get paid. Therefore you would just never recognize the income. And you can never write off more bad debt than the income you claimed from a job.

There is no need to recognize the income in order to claim the expenses either. You spent the money regardless of whether you got paid for the job or not.

The accountant friend may be using the accrual method in order to maximize gross income, although in reality any lender will look at net income anyway if you are self employed.

Reply by Bob_Chicago on 12/6/05 8:25am
Msg #80527

It is called "accrual ", but..........

, trust me, it will not work well for an NSA business.
You pick up income as it is earned, (when you do the job)
for instance if you do a job today, but do not get paid
until Janualry, you still pick it up on your 2005 taxes.
You also pick up for this year's taxes expenses incurred in
2005 but not paid by you until 2006.(you buy supplies
but do not pay for them until 2006.)
You also take a
bad debt allowance" estimate of bad debts and adjust it
as payment are made or not in the future
Even with the accrual method, you can not deduct
"lost opportunity costs"
what you are not making because an appointment cancels and
you turned down other work thinking that you were booked,.
That concept is known as "tough noogies" or in some circles,
"SOL"
Way too complicated to explain here.

We are better off using a "cash" basis of accounting
Pick up income as it is collected and incur expenses as
they are paid.

Reply by Bob_Chicago on 12/6/05 8:29am
Msg #80529

Just read Paul's post....

Whatever works for you

Reply by JD_inMD on 12/6/05 8:44am
Msg #80534

Re: Just read Paul's post....

As Bob says, no difference between the two methods in the long run as far as the bottom line goes. Using accrual you have already included the income in your earnings. The deduction just wipes that out. Using cash you never included it income anyway.

Reply by PAW_Fl on 12/6/05 8:41am
Msg #80533

Re: It is called "accrual ", but..........

>>> trust me, it will not work well for an NSA business. <<<

Well, I disagree, primarily because I've been using the accrual method for years. It just takes more bookkeeping than the cash method. Sometimes, counting the projected income and expenses in one year then taking the loss the following year has its benefits too. So, I really don't think anyone is "better off" one way or the other, as the accounting method, if not dictated by purpose or need, really is a personal choice.