Anyone missing 1099s?

[LostDollar]

You are incorrect.

Not so. Just keep in mind that if you have a set of business records that includes an account called deferred income there is also, either express or implied, an account called deferred income taxes. You are ultimately either going to have to return that deferred income cash to the insurance companies or pay income tax on it. If your incoming cash stream is relatively constant, the effects of converting a real cash flow to a hypothetical estimated income flow are going to manifest in the first and the last years. If your incoming cash flows fluctuate wildly, then there is a rather different situation.

 

[LostDollar]

If someone is too lazy to track their income accurately it is unlikely they will last more than 18 months in this or any business. If you don't think that otherwise successful folks don't get flushed out every year because or poor money management and not preparing and planning for their taxes properly you are mistaken.

You have basically got a discussion about 3 different issues going on in this one paragraph.

Management of your money.
Recording and reporting (to you, to your bank, etc) your business income.
Computing and paying your income taxes.

 

[mudhound]

I have most of mine. Granted, I just got what i think is the last one Friday??

 

[Rirwin]

Wow, why anyone would pay the irs on money that is subject to being chargedback is beyond me.

 

[HoosierLife]

Income will fluctuate year to year.

Charge backs will fluctuate year to year.

It will not "magically" wash out at the end of a career. There is a reason that 1099's are required to be issued. It is to one's benefit to use the 1099 amounts when reporting earned income to the government. If you or anyone else does not think so, then you are free to wing it so long as you don't get caught.

Most of my 1099s include advances. I compared what I actually brought in to my biz account against the 1099s and they are the same or within a few hundred bucks of each other.

My concern is two fold: one, how much extra time will this take and two, if I were to switch mid-stream, would that cause an audit?

 

[somarco]

My concern is two fold: one, how much extra time will this take and two, if I were to switch mid-stream, would that cause an audit?

I am not an accountant but I have occasionally played one on fantasy night.

I presume you currently operate on an accrual basis and want to switch to cash basis. This link should address at least part of your question.

Can You Switch From Accrual to Cash Method of Accounting for the IRS?

 

[LostDollar]

Most agents would do well to operate on a cash basis vs accrual. Much easier to follow.

If you are ever audited they will look at cash flow.

@ hoosier life: before you make a change, pour yourself a cup of coffee and sit down and think a bit about what somarco said. Consider if your income taxes are enough of a problem to you that you want to invest time and effort in changed procedures.

Contrary to what daytimer said, the revenue stream less chargebacks and before other business revenue and deductions will balance out in the end. It is a matter of TIMING. ACCRUAL accounting is changing the recorded TIMING of revenue and disbursements from the month/year of receipt or disbursement to the month/year which the business owner thinks is most correctly associated with the revenue or disbursement.

A simple example of the concept is a depreciation schedule. You buy a car for your business. Cash basis, you subtract the cost of the car from your earnings in the year of purchase. Accrual basis, you decide the car has a benefit for 3 years. You subtract 1/3 of the cost of the car from each of 3 years earnings.

When using accrual accounting for:
Income taxes, you must comply with the tax code.
Annual/Quarterly financial reports to investors, you must follow generally accepted accounting procedures.
Yourself, you are free to delude yourself in any way you see fit.

You can probably obtain income tax advice for yourself from a CPA, an income tax attorney, an enrolled agent or a really sharp full charge bookkeeper type running a writeup and income tax preparation business supporting small business owners.

The tax code has provisions for changing accounting procedures. You should consult one of the types of tax people I just mentioned to find out how they apply to your situation.

Time?: That will be a function of a bunch of stuff, like how many carriers do you have to track? and how long is the period where there is chargeback exposure - 1yr, 2y2? etc.

 

[HoosierLife]

@ hoosier life: before you make a change, pour yourself a cup of coffee and sit down and think a bit about what somarco said. Consider if your income taxes are enough of a problem to you that you want to invest time and effort in changed procedures.

Contrary to what daytimer said, the revenue stream less chargebacks and before other business revenue and deductions will balance out in the end. It is a matter of TIMING. ACCRUAL accounting is changing the recorded TIMING of revenue and disbursements from the month/year of receipt or disbursement to the month/year which the business owner thinks is most correctly associated with the revenue or disbursement.

A simple example of the concept is a depreciation schedule. You buy a car for your business. Cash basis, you subtract the cost of the car from your earnings in the year of purchase. Accrual basis, you decide the car has a benefit for 3 years. You subtract 1/3 of the cost of the car from each of 3 years earnings.

When using accrual accounting for:
Income taxes, you must comply with the tax code.
Annual/Quarterly financial reports to investors, you must follow generally accepted accounting procedures.
Yourself, you are free to delude yourself in any way you see fit.

You can probably obtain income tax advice for yourself from a CPA, an income tax attorney, an enrolled agent or a really sharp full charge bookkeeper type running a writeup and income tax preparation business supporting small business owners.

The tax code has provisions for changing accounting procedures. You should consult one of the types of tax people I just mentioned to find out how they apply to your situation.

Time?: That will be a function of a bunch of stuff, like how many carriers do you have to track? and how long is the period where there is chargeback exposure - 1yr, 2y2? etc.

Right now, my income taxes take very little time on my side to prepare and thus keep my costs down with my CPA.

The only benefit I've heard so far is pushing the taxes off until next year where we will pay less taxes. After deductions, expenses and credits I pay a low % in income taxes as it is, so I am happy with what I'm doing. But I am always up for saving more money, IF the headache involved in switching is not greater than my savings.

 

[LostDollar]

It might be better for your thought processes if you think in terms of shifting taxable income (loss) rather than taxes.

This could be helpful to you in two ways that come to mind immediately.

a) We may come up with an environment in which taxes are going to go up. When you have been thinking in terms of taxable income, you are better prepared for tax rate discussions/thoughts regardless of whether its increase or decrease.

b)Your whole tax picture. If you get to the point where you have a variety of revenue and/or expense generating activities, thinking about each in terms of taxable income (loss) which they generate may help you get to your total tax picture in a more orderly manner.

 

[HoosierLife]

It might be better for your thought processes if you think in terms of shifting taxable income (loss) rather than taxes.

This could be helpful to you in two ways that come to mind immediately.

a) We may come up with an environment in which taxes are going to go up. When you have been thinking in terms of taxable income, you are better prepared for tax rate discussions/thoughts regardless of whether its increase or decrease.

b)Your whole tax picture. If you get to the point where you have a variety of revenue and/or expense generating activities, thinking about each in terms of taxable income (loss) which they generate may help you get to your total tax picture in a more orderly manner.

Well that's another point too. I don't know that it affect the current discussion, but I do have an Amazon business as well. It's taxes are done completely differently though. I have inventory. I don't get it at all.

I do know this: I need a new CPA. This one missed one of my kids, my quarterly tax payments and a 3rd business that I decided not to pursue, but took a little loss.

I will say, this is all over my head. I just want to pay someone to do this all for me in the least expensive and time consuming way as possible.