Tax season 2013 is underway, and it’s important that you realize that there have been some changes and delays to tax filing. On top of that, if you run a home business, you should be aware of the 1099-K form.
Before you run out to file your taxes, realize that the IRS isn’t even accepting returns until January 30, 2013. And, if you have certain forms to fill out, and certain deductions and credits that you want to claim, you might not be able to file your tax return until even later.
All taxpayers will see delayed filing this year. Those who are accustomed to filing early in January and then receiving a refund before February are going to be disappointed. Even if you decide to e-File, you can’t submit your tax return until January 30. The reason for this is due to the tax portion of the fiscal cliff deal that was passed at the beginning of this year.
There are also certain forms that are still being tested, though. So, you might not be able to file until February or March, depending on what tax breaks you are trying to claim. Check with a trusted tax preparer to find out whether your tax filing will be delayed. Most filers will just be delayed until January 30, but others may see bigger delays.
For many home business owners, the 1099-K has been a source of consternation. The 1099-K was supposed to take effect for tax year 2011 (and many third-party processors sent the form out), but it’s implementation was delayed until tax year 2012. So, if you are an independent contractor working out of your home office, you might receive this tax form. The 1099-K is issued by credit card processors, banks, and services like PayPal that handle transactions between two parties.
If you have at least 200 transactions, and have done $20,000 in business with the help of payment processors, you have to be issued a 1099-K. Even if you did less than that, the payment processor can choose to issue you a 1099-K anyway, and report your income to the IRS.
It’s important to understand, though, that the 1099-K only shows your gross income. It doesn’t include expenses, fees, or chargebacks. You will need to keep good records so that you can demonstrate how various costs offset some of the income shown. Additionally, many independent contractors might see some of their income double reported. If you have a client that pays via PayPal, you might receive a 1099-MISC from the client, and that income might also be reported as part of the 1099-K. Keep track of what income is double-reported.
Still Time to Get Tax Deductions
Finally, you still have time to take some tax deductions. You can contribute to a Traditional IRA, and have it count for the previous year, up until April 15. Just make sure you are clear that you are making a previous year contribution. On top of that, you can also make previous year contributions to a Health Savings Account if you have one. If you are teetering on the edge of a tax bracket, or if another deduction might help you keep you income lower for another tax benefit, making an extra contribution can be a help.