Anyone missing 1099s?
- Thread starter Meghan28
- Start date
If we didn't all pay taxes, how would TT of fed his family?
- 7,012
That's so wrong lol
- 30,590
Eeeeeek!!! I'd forgotten about that evil bitch.
- 7,145
I've been trying to think through these posts and have a question.
These chargebacks.
I'm assuming the insurance carriers make production computations for a month and then pay you your earnings for production in the following month. If there are chargebacks, do they subtract them from your check, or ask you to write a check to them for the chargebacks?
Now see, that's as simple as it gets. Money in and money out. If you have a chargeback you will either be able to show where you physically paid it or the company just keeps it. Either way, it will reflect in a cash in/cash out basis.
- 7,012
Very rarely do I have to write a check for a chargeback. The companies where I just wrote them for a single case that falls off. Foresters is really bad about this even if you have months 10-12 coming in.
Most chargebacks come out of future commissions.
- 7,145
Thanks for the response. I need to think a little more now. I also looked at the 1099 instructions this morning.
I believe that daytimer disagrees with this assessment, but I think your very first post was right on the money-the insurance agent should choose 1099s or the P&L and go forward with that choice.
My difficulty at the moment is in thinking out the way to clearly explain why. I'll think on that some more.
I personally like the way you have chosen to do it. It is a procedure which both the IRS and banks understand. In my personal opinion, as long as your production (ie annual premium written?) is relatively constant year to year, I don't think you will have a significant difference between the 1099 method and the P&L method.
Accounting technical jargon. Cutoff and timing. Business owners are picky. They want to know, "Did I make money last month?". A business has a flow of transactions. In order to answer the owner's question, the accountant has to cutoff, the flow of recording transactions at the end of one month and restart it at the beginning of the next month. Each transaction has a set of circumstances. Back to the commission on production-the selling month in which you earned it or the month in which you received the check for it. Accountants can have timing problems when they try to match records for the company paying the commission with the records for the agent receiving the commission.
Business owners have timing problems when trying to determine which year or which month in which to place a revenue or expenditure transaction.
Cutoff and timing issues will determine the accounting periods in which a revenue or expense item is recorded.
The answers to reconciling the "disagreement" over using 1099 vs P&L lie in these terms and processes, I just can't get the picture and words in my head to explain it.
I believe that daytimer disagrees with this assessment, but I think your very first post was right on the money-the insurance agent should choose 1099s or the P&L and go forward with that choice.
My difficulty at the moment is in thinking out the way to clearly explain why. I'll think on that some more.
I personally like the way you have chosen to do it. It is a procedure which both the IRS and banks understand. In my personal opinion, as long as your production (ie annual premium written?) is relatively constant year to year, I don't think you will have a significant difference between the 1099 method and the P&L method.
Accounting technical jargon. Cutoff and timing. Business owners are picky. They want to know, "Did I make money last month?". A business has a flow of transactions. In order to answer the owner's question, the accountant has to cutoff, the flow of recording transactions at the end of one month and restart it at the beginning of the next month. Each transaction has a set of circumstances. Back to the commission on production-the selling month in which you earned it or the month in which you received the check for it. Accountants can have timing problems when they try to match records for the company paying the commission with the records for the agent receiving the commission.
Business owners have timing problems when trying to determine which year or which month in which to place a revenue or expenditure transaction.
Cutoff and timing issues will determine the accounting periods in which a revenue or expense item is recorded.
The answers to reconciling the "disagreement" over using 1099 vs P&L lie in these terms and processes, I just can't get the picture and words in my head to explain it.
Separate business checking account, cash accounting, no advances is the easiest.
Gross income is what goes in. Expenses including taxes and salary comes out. Anything left in the account at years end may be taxed separately depending on how the business is structured.
No worrying about 1099's, chargebacks or anything else as long as you keep business separate from personal.
Advances may be necessary for some starting out but most agents eventually convert to paid as earned. Advances lead to chargebacks. If you are still writing business the carrier deducts chargeback from future earnings. If not, you write them a check.
And yes. Pick a method, cash or accrual, and stick with it. You can't do it one way this year and differently next year.
Gross income is what goes in. Expenses including taxes and salary comes out. Anything left in the account at years end may be taxed separately depending on how the business is structured.
No worrying about 1099's, chargebacks or anything else as long as you keep business separate from personal.
Advances may be necessary for some starting out but most agents eventually convert to paid as earned. Advances lead to chargebacks. If you are still writing business the carrier deducts chargeback from future earnings. If not, you write them a check.
And yes. Pick a method, cash or accrual, and stick with it. You can't do it one way this year and differently next year.
- 1,912
Most agents will never go as earned.
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