1099s & 1099-Ks - What you need to do!
Okay, let’s talk about 1099s and 1099-Ks.
What’s the difference?
A 1099-K is a document you receive from your credit card processor. Any big payment processors like Stripe or Paypal are required to issue one if they paid an entity more than $20,000 during the year and processed more than 200 transactions during the year.
This is very different than the 1099-MISC, which are the 1099s you issue to contractors you paid over $600 during the year.
If you’re a sole proprietor or an LLC, chances are you received a 1099 (or a few!) from the insurance companies you are paneled with. Make sure to keep these with your business tax documents!
Now that you have them saved, what do you do with them?
Make sure they are correct.
Does anything look wrong? Do your homework and double check them! If something is incorrect you should reach out to the issuer and request that they issue a correction. (This could be simple or complicated–but worth it!)
Make sure that you have recorded ALL the income on your books. One often overlooked item? Processing fees. Let’s say that you received $100,000 from Stripe but they withheld $3000 in fees. Your net deposit is $97,000. If you only report the net deposit, the income you report on your tax return might not match the totals of the amounts reported to the IRS.
For that reason you should record the $100,000 gross deposit and the $3000 fees. The net result is the same but you will avoid any matching issues.
Reporting an amount larger than the total of the 1099s you received? Then you’re in good shape!
So, why do you need an accounting software? Can’t you just rely on your 1099s to calculate your income?
There’s a good chance that you received more (or much more!) than is reported in your 1099s. Think about: checks, cash, co-pays, consulting revenue, and any other way you may receive payment.
Accounting software keeps track of ALL the income coming into your business. Although an EHR might reliably keep track of your income, it usually doesn’t track your expenses. It’s always better to use accounting software so you can track income and expenses carefully and not miss any deductions.
Because more money = greater happiness. (Okay, I’m kidding.)
But I’m not kidding that the best antidote to a fear of taxes is organization!
If your practice could use some support in that department, we’d recommend outsourcing some of your accounting responsibilities. And as you know, GreenOak Accounting specializes in working with therapy private practices–messy books and all.
This article is designed to provide information only and should not be considered legal or tax advice. Because of the complexity of the law and the variables in your own personal tax situation, you can’t rely on our advice specifically related to your unique circumstances. In order to get the best tax savings and legal advice available to you, you should consult with your own accountant, attorney or advisor regarding your particular facts and circumstances. GreenOak Accounting is an accounting firm that specializes in working with counselors and therapists in private practice. We provide monthly accounting & bookkeeping services, 1-time services and online courses. For more information on our specialized services for therapists please visit https://www.greenoakaccounting.com/our-specialized-services-for-therap