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Accounting Software Alert
Did You Miss the New 1099-MISC Requirements?

The IRS has issued new regulations for reporting payments on Form 1099-MISC. Some accounting software packages are keeping up. Others are not.

Regardless, companies have the burden to comply.

Quick Books, the most widely-used accounting software, released an update. QuickBooks 2012 R6 (U.S. version) includes new functions for 1099-MISC.. Intuit provides more information at
http://payroll.intuit.com/support/kb/1002600.html

Essentially, the IRS wants to capture more unreported income--specifically income from payments on credit cards. The gist of the change is as follows

  1. If you pay a 1099 vendor with a credit card or other 3rd party transaction (such as PayPal), you are supposed to EXCLUDE that payment from the 1099-Misc you issue to that vendor.
  2. The third-party payer (credit card processor, bank, etc) will file a 1099-K to report those payments.
  3. You are supposed to exculde these payments from the 1099-MISC''s that you issue. If you do not exclude those payments from 1099-MISC you will be over-reporting the payments to your vendor.

If your software does not provide the necessary updates,you may face some manual reconstruction effort.Some internet chatter speculates that the IRS will be more lenient for tax year 2011 and more strict in 2012. Obviously, nobody knows for sure.

Recommendations

We advise companies subject to 1099 reporting requirements to consult with their tax advisor on exposure and materiality. If your software brand does not directly handle this new IRS requirement, manual methods are available to calculate included and excluded payments.