Tuesday, May 4, 2010

New Tax Law May Affect Small Websites and Writers

A new tax law passed with Health Care Reform may affect the way small businesses (e.g. writers starting websites which some start-up costs) do business.


According to Chris Edwards of the Cato Institute and The Finance Buff, the new law would require businesses to issue a Form 1099 to any entity (person or corporation) to whom they pay $600 or more. So if you pay someone to build your website and the bill comes to $600, you would need to issue a 1099. If you deduct your apartment as a place of business, then you would have to issue a 1099 to your landlord when you pay rent.

Am I worried? Not really. From the descriptions, this law would create so much more paperwork that I imagine it will be repealed. And it wouldn't take effect until 2012, so we have some time yet.  But one message is clear - if you plan on starting a small business as a writer, make sure to do your research.  Find out what tax laws will affect you and what documentation you'll need to keep in order to stay sane and legal.

3 comments:

Ryan Edel said...

Hi Alena,
Thanks for your interest. Is there anything in particular you'd like to learn more about?

Ben said...

Ryan, I'm pretty sure businesses are currently required to issue 1099s for contract work of $500 or more. It's not a big deal. Honest citizens will pay taxes regardless of 1099 situation, espescially given that the current financial reform package will give the government reports of all of your financial transactions.

Just write off the cost of your favorite tax program as a business expense. It won't be too bad.

Ryan Edel said...

I think the part that worries me is that the new 1099 rule would affect more than just contract work. If a business is large enough to hire contractors, I imagine they already have some good accounting in place. But I worry about the small one-man-show type businesses - the way this new law is written, you'd have to write a 1099 to Office Depot if you buy $600 of office supplies. Who do we mail that 1099 to? And will Office Depot want to give out their Tax ID Number to ordinary customers who simply purchase a laptop, a printer, and a new office chair? It just seems like a lot more work added on to the small businesses for the kinds of transactions that are already tracked via sales tax and reported revenue.