Tax Tip from the week of March 19, 2012

Note these 2011 Schedule C changes

Tax laws and information reporting requirements continue to change — and so do tax forms. Schedule C, the form you include with your federal tax return to report income from your sole proprietorship, is no exception.

Here are two changes to the 2011 Schedule C.

• New informational questions. Did you pay rent or hire an independent contractor to perform services for your business during 2011? For payments to certain vendors that total more than $600, you're required to complete Form 1099-MISC — and the IRS wants to make sure you do.
  
  Two new questions on the 2011 Schedule C ask about your information return filing responsibilities.

• New reporting for gross receipts. You might have noticed Line 1a, merchant card and third party payments, in the income section of your Schedule C.
  
  Ignore it.
  
  Why? The requirement for reporting this category of receipts separately from other types of income was suspended after Schedule C was printed. For 2011, you can report your total sales on Line 1b, gross receipts or sales.
  
  That's true even if you get one or more Forms 1099-K, the new information return that shows the amounts your business received during 2011 from credit card sales or third party networks such as PayPal.

Got other questions about the new Schedule C? Give us a call. We'll keep you up to date with the latest developments.

© MC 2012