2012 1099 Laws and how it relates to the $ your kid earns from livestock sale

[herfluvr]

Was just talking to our accountant.  Not sure if you all know about the new 1099 Laws starting in 2012 that pertains to who gets a 1099
Basically starting 2012, if you pay out over 600.00 to anyone or any corporation for a business good or expense you will need to issue a 1099 to that person or business to show you paid them that money.
Now, what about the corporations that come to the fairs to support the livestock auctions and run the purchases through there business as "donations" or company purchases?  It would appear, as in our case, when my friend's company writes my son a check for his fair pig, my son will be getting a 1099 from the friend's company to show who he paid money to my son at the county fair for a hog.  Son in turn, in order to offset his "earnings" from the hog will then need to send a 1099 to the pig grower he bought the pig from because he paid more than 600.00 for the hog at the sale, the feed mill if more than 600.00 and any other expense relating to the growing of this pig for more than 600.00. NOw we get 2 good pigs.  We pay about 1000.00 to 1500.00 for theses show hogs.  Friend is very genoerous and pays some well at auction so it is about a break even deal so the profit/loss is pretty even so my question for you cattle guys is this;

If a show steer costs a child 5000.00.  They have a good year showing and have kept track of feed,hauling, miles and all expenses related to the show steer.  It has been a great year and they had a ball winding up at the State Fair where the animal goes on the carcass truck and purchased by the kill buyer for about 1500.00.  Since the kill buyer pays the child over 600.00 for the animal, the kill buyer must issue a 1099 to child to show where the money went for the steer because that is what the government wants us to do, the child will file taxes because he has a 1099.  After he deducts all of his expenses and he will show a loss(as so many of us do but would not trade the experience for the world), how much do you think the government will be paying back to our kids every year?

What will this do to the high dollar sales?  A 50K steer can be eaten but at the end of all his wins, he is pretty much worth the same as the rest of the steers in the yard.
What do we do when we set aside this money so we can have a fun hobby only to show we take a loss every year we are in it because we are not in it for the money but the experience?  The government now says we can only take a loss for 5 years.  Then What?

Now even if showing is a "hobby", you are allowed to deduct the expenses you inccurred while doing your "hobby" so you don't have to be a corporation but since a business has purchased something from your child over the 600.00 limit, your child must file taxes on it.

Now if this is news to you, please contact your accountant and have them explain it to you.  This is a major PITA for some industries and certainly the show industry is one of the ones the government knows nothing about.  

Please let me know your ideas about this and if you are upset reading this, make sure you send this on to your representatives in your local government.  Joan


PS.  THIS LAW WAS PUSHED THROUGH INSIDE OF THE HEALTH CARE REFORM AND HAS BEEN DENIED REPEAL 2 TIMES ALREADY

ETT  http://money.cnn.com/2010/05/05/smallbusiness/1099_health_care_tax_change/

 

[KCK]

Got this e-mail from the boss yesterday....

For Immediate Release                                                               
January 25, 2011                                                                                                                                                           
BAUCUS, REID INTRODUCE AND PLEDGE TO PASS REPEAL OF 1099 REPORTING REQUIREMENTS
Senators hope for bipartisan cooperation to ease requirements for businesses

Washington, DC – Senate Finance Committee Chairman Max Baucus (D-Mont.) and Senate Majority Leader Harry Reid (D-Nev.) today introduced and pledged to pass a bipartisan bill that would repeal certain new reporting requirements for businesses.  Business owners have said that these new reporting rules would be too time consuming for businesses to meet.  Baucus and Reid said today they hope to pass a repeal of these rules with strong bipartisan support. 

“We have heard small businesses loud and clear and are responding to their concerns,” said Baucus.  “Small businesses need to focus on creating good-paying jobs – not filing paperwork.  Many of my colleagues on both sides of the aisle want to work with the small business community to eliminate these requirements, and it is my hope we can come together to pass legislation quickly.” 

“Small businesses, the engine of our economy, told us the 1099 provision was burdensome, and we are responding quickly to ensure that they can keep running smoothly,” said Reid.  “Making it easier for small businesses to thrive should be something Republicans and Democrats can agree on.  I hope we can come together on common-sense reforms like these to improve a law that is already saving money and saving lives.”
The bipartisan legislation would repeal requirements for businesses to report payments made for goods and certain services to the IRS using tax form 1099.  This expansion of the 1099 reporting requirements was proposed by the Bush administration to help better keep track of what businesses spend and earn, which in turn helps better keep track of tax liability.  The Treasury Department estimates that more than $345 billion in owed taxes go unpaid each year.  As Chairman of the Finance Committee, Baucus worked together with the Bush Administration to begin crafting the policy, which was designed to collect more of those unpaid taxes and help keep taxes lower for all taxpayers.  However, after the policy was finalized late last year and became law in early 2010, more businesses owners became aware of the new paperwork requirements and raised concerns about the resources that would be required to complete the forms when they would need to begin doing so in January 2012.  Baucus previously introduced legislation to repeal these form 1099 reporting requirements during the 111th Congress in November 2010.     

Baucus and Reid have long worked to bolster small business and provide the tools small businesses need to grow.  They recently worked to pass the Small Business Jobs Act, which helps small businesses access capital, stimulates investment in small businesses and promotes entrepreneurship.  Baucus and Reid said today they intend to continue partnering with the small business community to craft innovative solutions to enhance tax administration to make our nation’s tax system fairer and without raising taxes on anyone. 

 

[herfluvr]

"...The Treasury Department estimates that more than $345 billion in owed taxes go unpaid each year.  As Chairman of the Finance Committee, Baucus worked together with the Bush Administration to begin crafting the policy, which was designed to collect more of those unpaid taxes and help keep taxes lower for all taxpayers.  However, after the policy was finalized late last year and became law in early 2010, more businesses owners became aware of the new paperwork requirements and raised concerns about the resources that would be required to complete the forms when they would need to begin doing so in January 2012.  Baucus previously introduced legislation to repeal these form 1099 reporting requirements during the 111th Congress in November 2010."

The government needs all the money they can get.  $345 billion in potential revenue is what will keep this bill from being replealed.  I have spoken with our representative Joe Donnelly and while he understands the burder placed on the small business person the above number is jsut too large to ignore.  The government wont give up this kind of money.

 

[Jill]

That is actually how the law reads now, that is how our state fair has always done business, if you win, you get a 1099 showing your winnings.

 

[jason]

The government needs all the money they can get.  $345 billion in potential revenue is what will keep this bill from being replealed.  I have spoken with our representative Joe Donnelly and while he understands the burder placed on the small business person the above number is jsut too large to ignore.  The government wont give up this kind of money.

They need all the money they can so they figure out to waste it or line their pockets.

Just like locally they decided to spend 100K+ on 4 rocks that say the name of our town to put at the city limits.  Never-mind we have businesses closing in town and houses getting foreclosed on.  How about offering tax breaks to businesses that hire new workers???  Sorry for the thread jack.

Back on subject, this will be impossible to keep track of and I am glad to see their is a possible repeal.

 

[blackcows]

Now even if showing is a "hobby", you are allowed to deduct the expenses you inccurred while doing your "hobby" so you don't have to be a corporation but since a business has purchased something from your child over the 600.00 limit, your child must file taxes on it.

Your not able to deduct expenses for a hobby.

Mike

 

[herfluvr]

Now even if showing is a "hobby", you are allowed to deduct the expenses you inccurred while doing your "hobby" so you don't have to be a corporation but since a business has purchased something from your child over the 600.00 limit, your child must file taxes on it.

Your not able to deduct expenses for a hobby.

Mike

Here is the link to the IRS that does tell us we can deduct hobby expenses but the key words here are "reasonable" and "closely related to".  Our horse association sends us a 1099 for childs earnings.  We then deduct what it took him to earn money at that specific show.  We are reasonable and use only stalls, entry fees and gas to offset the earnings.  We always show a profit but show that it took money to get those earnings.
Here is the IRS link you might want to look at.  All my horse friends that earn money from Incentive Funds and winnings offset them this way.  Even if they are doing this as a "hobby" but with the intent to win and make some money back  Joan

http://www.irs.gov/publications/p529/ar02.html
Other Expenses
You can deduct certain other expenses as miscellaneous itemized deductions subject to the 2%-of-adjusted-gross-
income limit. On Schedule A (Form 1040), line 23, or Schedule A (Form 1040NR), line 11, you can deduct expenses that you pay:

1.To produce or collect income that must be included in your gross income,[/color]

2.To manage, conserve, or maintain property held for producing such income, or

3.To determine, contest, pay, or claim a refund of any tax.

You can deduct expenses you pay for the purposes in (1) and (2) above only if they are reasonable and closely related to these purposes.

These other expenses include the following items.

Appraisal fees for a casualty loss or charitable contribution.

Casualty and theft losses from property used in performing services as an employee.

Clerical help and office rent in caring for investments.

Depreciation on home computers used for investments.

Excess deductions (including administrative expenses) allowed a beneficiary on termination of an estate or trust.

Fees to collect interest and dividends.

Hobby expenses, but generally not more than hobby income.Indirect miscellaneous deductions from pass-through entities.

Investment fees and expenses.

Legal fees related to producing or collecting taxable income or getting tax advice.

Loss on deposits in an insolvent or bankrupt financial institution.

Loss on traditional IRAs or Roth IRAs, when all amounts have been distributed to you.

Repayments of income.

Repayments of social security benefits.

Safe deposit box rental.

Service charges on dividend reinvestment plans.

Tax advice fees.

Trustee's fees for your IRA, if separately billed and paid

 

[Show Dad]

Don't you think Reid and Baucuss  are talking out of both sides of their mouth? They were the idiots that voted for it in the first place!

They will let it go if we the people give them enough grief about it.

 

[GoWyo]

They had to pass the law to find out what was in it cuz they didn't have time to read it before they rammed it through.  ???

 

[JTM]

Pushed by the Bush administration through the health care reform bill? Something doesn't line up here.

 

[farmin female]

OK everybody, simmer down.  It has been the law that you pay income on anything over $600 FOREVER!  And, I have been an accountant for a couple of decades and yes, back in the 80's it was also the law that you send out 1099's for anyone who you pay over $600.  It's not that hard.  All you have to do is keep records.  So your kid buys a pig for $500, it is a deduction on your schedule F (farm income) which offsets any income they make.  Educate yourself on what is deductible and most importantly, keep all your reciepts and document your mileage. 

And never, ever, ever refer to your project as a hobby cause the IRS will take you to the cleaners on that one.

 

[herfluvr]

OK everybody, simmer down.  It has been the law that you pay income on anything over $600 FOREVER!  And, I have been an accountant for a couple of decades and yes, back in the 80's it was also the law that you send out 1099's for anyone who you pay over $600.  It's not that hard.  All you have to do is keep records.  So your kid buys a pig for $500, it is a deduction on your schedule F (farm income) which offsets any income they make.  Educate yourself on what is deductible and most importantly, keep all your reciepts and document your mileage. 

And never, ever, ever refer to your project as a hobby cause the IRS will take you to the cleaners on that one.

Problem being when you purchase show animals and pay a premium for them knowing that the check at the end will cover the feed and that is about it, how long will the kids get to turn the expenses for the project only to show a loss every year?  They got a 1099 and they are legally able to turn in the expenses related to that income. I am just talking purchase price, feed and vet.  For a 10 year project, I believe they can't do it every year. 
So yes, this is a PITA.  We will be now issuing 1099s to at least 15 businesses and our accountant will charge me for each one.  Last year I paid 45.00 for the one I needed for my service business.  So paying taxes on anything over 600.00 and now issueing 1099s to all people we do business with over the 600.00 mark is a burdern for the small business owner.  My last count was 15 and I am still totaling out tax totals for this year.  I am sure we will have more. 

 

[Jill]

You can do them yourself for very little money, they IRS will send you the forms for free, it isn't that big of a deal.

 

[herfluvr]

You can do them yourself for very little money, they IRS will send you the forms for free, it isn't that big of a deal.

With the company that has done our taxes for years, we pay for the service that should we be audited, they will go in on our behalf and take care of it.  It is a small fee but worth the piece of mind.  So they need to handle all aspects of our taxes including the 1099 so as they know they are responsible not us for those.  They will not offer us the service if I send the 1099 and with having now 4 self-employed businesses we don't feel we can eliminate that service.  So we will pay.

 

[bruiser]

I'll be glad when the dems find someone other than George Bush to blame things on. Awfull funny he hasn't been pres for over two years but catching hell li8ke he just walked out of town.