This year especially, taxes are important. There are some big changes to the tax code that you need to know about and in this video, Steve Strauss will tell you what they are.
Okay, so I want to talk for a moment about taxes. Stop. Don't worry. I'm not going to bore you. In fact, I think what I'm going to tell you, you're going find kind of amazing, and maybe even shocking. Lawmakers love to play with the tax code, especially vis-a-vis small business. They will lower our taxes in order to create jobs. Or, they'll raise our taxes in order to increase revenue. Whatever it is, you're going to find that tax code changes almost every year, with regard to small business, because there's different goals and different values going on. This year is no exception. In fact this year, it's worse, because there's a new requirement with regard to 1099 reporting that you need to know about. If you don't know about it, it could end up costing you a lot of money.
In all likelihood, you know what a 1099 is. Those are those forms you got to fill out for the government, and send to your independent contractors, among other people to whom you spend more than $600 in any year. All right, so if your business hires an independent contractor, you spend more than $600 on that person, you send them a 1099, and you report it to the government, and everyone knows how much money you spent on that independent contractor. This year, things got worse, and here's why. The new health law has changed things such that you don't only have to report 1099s for services over $600, but, for products and corporations in which you spend more than $600. If you in fact spend more than $600 on anyone or any thing this year, you're going to have to file a 1099 next year for it.
What that means is you're going to end up filing a lot more 1099s than you probably did this year. You got to keep really good track of where you're spending your money. You have to keep very good track of your expenses. If you don't, and you don't file properly, the penalties this year have gone up dramatically. I've even seen one penalty for willful failure to file increased five-fold to $500,000. You have to be very, very careful. You have to track your expenses. You have to know where you're spending more than $600. Then, next year, you going to have to file a lot of 1099s. Sorry, that's the way it is.