DON’T FORGET YOUR FLEXIBLE SPENDING MONEY

Check your flexible spending account balance. You must clean it out by Dec. 31 if your employer still has not adopted the 2½-month grace period that IRS now permits. Otherwise, any money remaining in your account is forfeited. When you are deciding how much you should put into your flex plan for 2012, remember that a $2,500 annual cap on FSA payins is set to go into effect in 2013.

WHO MUST ISSUE 1099-MISCs

Here is some basic information about 1099-MISC:

First of all you just need to do a 1099 for certain business expenses.
o For example, someone paints your personal residence and charges you $1,100 you do not have to give that person a 1099. On the other hand if that person should paint your business property and charged you $1,100 you would give that person a 1099 for $1,100

You just have to issue a 1099 for services, not for tangible business purchases
o If the painter gives you a bill for painting and the bill includes labor and the cost of paint you would still give the painter a 1099 for the whole purchase

You do not need to give a 1099 to a corporation
o Both C corporation and S corporations qualify
o You must give a 1099 to LLC’s and partnerships

You just need to give a 1099 if you pay over $600 during the year
o For example the painter paints your business in January and charges you $400 then later in the year you bring them back and he does another $500 of painting. The total is over $600 so you must give the person a 1099

There is no penalty for sending a 1099 to a corporation so if in doubt play it safe and send. Of course there are more rules but these are the basics ones.

ONLY IN AMERICA

A fugitive who took a Kansas couple hostage in their home is suing them for $235,000. Accused murderer Jesse Dimmick claims Jared and Lindsay Rowley accepted his knifepoint offer of money to hide in their house. But the Rowleys later breached their "oral contract" by escaping as he slept, Dimmick says, "resulting in my being shot in the back by authorities."

Wow only in America!

SALON SOFTWARE REPLACING QUICKBOOKS

Q. I am thinking about getting rid of my QuickBooks and using my salon software for my P&L, general ledger and accounts payable. My salon software has a great deal on it right now. What do you think about this?

A. It just doesn't work well~ the softwares are for two different purposes. Plus they are a good checks and balance for each other. BUT I believe you still need professional assistance in interperting your financial statements and sometimes your salon reports. I can't count the number of people who have made expenseive mistakes because they did not have good data.

For example, I can buy a Flowbee to cut my hair at home. But I will end up going to a professional for help. The same goes for your accounting - you need a professional. Wouldn't I have better looking haircut if I had seen you first?

Remember you can manage what you can measure and if all you have is garbage, it will pile up quickly.

2012 STANDARD MILEAGE RATES

The Internal Revenue Service today issued the 2012 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2012, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
• 55.5 cents per mile for business miles driven
• 23 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

The rate for business miles driven is unchanged from the mid-year adjustment that became effective on July 1, 2011. The medical and moving rate has been reduced by 0.5 cents per mile.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Independent contractor Runzheimer International conducted the study.

You do have the option of calculating the actual costs of using your vehicle rather than using the standard mileage rates.

QUESTION FROM A MISCLASSIFIED WORKER

Q. I am definitely an employee at my job but, my employer did not withhold anything and instead of giving me a W-2 like he should have he gave me a 1099. Last year he gave me a W-2. Now not only do I owe a bunch of tax I also have to pay both halves of the Social Security and Medicare tax. This is not fair. Is there anything I can do?

A. Yes there is something you can do to cut your Social Security and Medicare in half. Since 2007, you are allowed to file a Form 8919M Uncollected Social Security and Medicare Tax on wages instead of filing Schedule SE. The form SE charges you tax at 15.3% versus the 7.65%.

There are some codes on the form that you will need to review and if you meet one of the criteria, walla you qualify.

By the way, this IRS may be visiting your employer. He will at least be getting a bill from the IRS for his 1/2.

HARSH 1099 PENALTIES

The IRS wants everyone to issue 1099's so that they can spot unreported income. This year the penalty for failure to file a 1099 is $250 per form with an addition $250 per form if you did not act in good faith.

I can guarantee you that one of the first things that the IRS looks at during the audit is 1099's. It is easy money for them if you did not file.

Think about it. If you missed 10 forms for three years the penalty would be $7,500 minimum with it possibly going to $15,000. That is on just 10 missed forms. Do the math. Make sure you issue 1099's.