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With this insane IRS filing contradiction, how do business owners file 1099s this year?

(BUSINESS FINANCE) If you pay contractors, this wonky IRS filing contradiction may leave you scratching your head…

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All small business owners know the importance of hitting the tax deadlines on time, otherwise we risk being out of compliance with the IRS. If you or your small business worked with independent contractors this past fiscal year, then you’re probably aware of the IRS deadline for the 1099-MISC form on January 31, 2018. However, one thing you may not be aware of is a large tax reporting hole which solely depends on how you paid your contractors.

The 1099-MISC is the form in which a business must file for independent contractors receiving $600 dollars for receipt of goods or services. That concept itself is fairly simple ($600 equals reporting to the IRS), but depending on the method of payment used is where things become more complicated. This is because of a rule created in 2008 in the Housing and Economic Recovery Act (HERA) that didn’t go into effect until 2012. This bill had a provision inside which (surprise) had nothing to do with the housing crisis.

Essentially, the rule states that if you, business owner, pay a independent contractor via a third-party service (Paypal, credit card, or debit card), you would not file a 1099-MISC for that contractor, but the third-party would file that income instead on a 1099-K. Sounds air-tight so far.

Except, it’s not.

The rules of the 1099-K are not the rules of the 1099-MISC but for third-party vendors. The 1099-K rules state that reporting is mandatory ONLY when “gross payments to an individual payee exceed $20,000 for the year and when there are more than 200 transactions with the participating payee.”

Just on reading this statement alone, it seems as if there’s a huge tax reporting hole (approximately $20,000 dollars) if paying someone via a third-party. This can’t be right… right?

When Kelly Phillips Erb asked IRS spokesperson about the rules and also to confirm this language as being the correct interpretation “even if they’re over that $600 threshold and even if they are under the $20,000/200 threshold?” Yup, that’s correct, even if the IRS admits to that being a loophole.

Some tax advisors are advising businesses to file 1099-MISC regardless of method of payment. Some tax advisors are advising businesses to file according to the rules set down by the 1099-K (20,000/200 rule). Confusion and conflicting instructions abound. At the end of the day, the choice of how to file is best up to you and your tax professional, as it appears that the IRS is having issues with this ridiculous tax reporting issue.

This article should not be used as tax advice. If you need assistance with the forms and procedures referenced in this article, please consult an accountant or other tax professional.

Alexandra Bohannon has a Master of Public Administration degree from University of Oklahoma with a concentration in public policy. She is currently based in Oklahoma City, working as a freelance filmmaker, writer, and podcaster. Alexandra loves playing Dungeons and Dragons and is a diehard Trekkie.

Business Finance

Credit card companies crap on cryptocurrencies

(FINANCE NEWS) Credit card companies are now trying to make customers slow their roll when purchasing crypto – and it’s kind of shady.

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Visa and Mastercard and now making it more difficult for their customers to purchase cryptocurrency by slapping additional fees on transactions. This month, Bitcoin investors using Coinbase noticed additional fees on bank statements and were like, wait what?

Turns out, the credit card companies decided to reclassify cryptocurrency transaction type from “purchase” to “cash advance.”

Coinbase confirmed the change in an email to its customers, noting “the MCC code for digital currency purchases was changed by a number of the major credit card networks.”

A Mastercard spokesperson claimed the change “provides a consistent view of such purchases for both merchants and issuers.”

This means an additional five percent fee is slapped on to every transaction from the credit card company in addition to the four percent credit card processing fee Coinbase already passes on to its users.

Right now, if you want to buy Bitcoin or other cryptocurrencies instantly, your only option is using a credit or debit card. Transferring funds from your bank can take days, and since crypto prices can change in an instant, this isn’t a great option. Although there are lower fees for transferring funds via ACH, investors may get stung by fluctuating prices.

So basically, you’re going to use a credit or debit card for efficiency, but Visa and Mastercard want to make this harder on you. Unlike purchases, transactions labeled as “cash advances” don’t fall under an interest-free grace period. As soon as the purchase goes through, it accrues and compounds daily, so that’s pretty neat.

In addition to the new fee, cash advances carry higher interest rates as well.

Adding insult to injury, using a card for crypto purchases does not earn credit card points.

The card companies are equivocating bitcoin to withdrawing money from an ATM. This conflicts with the IRS’s stance that bitcoin is not currency, but rather taxable property.

Until everyone gets their stories straight, investors get stuck in the middle with more barriers to purchasing crypto, and conflicting regulation and processes.

And for Visa and Mastercard, that’s kind of the point. Their aim is to slow the rush of investment, even at the risk of losing potential millions in additional revenue. Assuming Bitcoin and other cryptocurrency don’t total crash and burn, eventually financial middlemen like credit card companies will be cut out of the picture.

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Business Finance

Don’t mess with Texas – especially when it comes to crypto

(FINANCE NEWS) The State of Texas is cracking down on crypto companies, and this won’t be the last cease and desist issued.

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After a one month undercover sting of crypto-currency startup DavorCoin, the Texas State Securities Board (TSSB) issued another cease-and-desist letter, ordering the cryptocurrency company to stop all operations in the state immediately; this is the state’s fourth emergency cease-and-desist in just one month regulating cryptocurrency companies.

Jason Rotunda, director of enforcement division at the TSSB told CNBC, “We confirmed our suspicion that they were being marketed toward retirees. [DavorCoin] was not disclosing the information that needs to be disclosed to an investor.”

Other cryptocurrencies being issued cease-and-desists include companies r2b coin, BitConnect, and USI-Tech Limited. All of these companies either were promising implausible or impossible returns on investment, low risk investments coming from Bitcoin mining–without the evidence to back it up, or not disclosing information required by state law.

After the TSSB pulled the plug on BitConnect, they started their investigation of DavorCoin for promising extremely similar ROI. DavorCoin also has another strike against it, a potentially more serious one: Investment fraud. DavorCoin, according to CoinDesk, has “intentionally hidden material information of its business–including its principles and business location, as well as how it plans to realize investment promises for investors.”

The lack of transparency on not just the basic information regarding the business itself, but also an investor disbursement plan violates sections of the Texas Securities Act.

Texas currently is leading the way regarding the regulation of cryptocurrenty investment opportunities, in which other states as well as the federal government are following suit. Other states filing formal complaints against cryptocurrency companies include Florida, North Carolina, Massachusetts, and Kansas.

The U.S. Securities and Exchange Commission, as well as the U.S. Commodity Futures Trading Commission, is taking note of the heightened amount of activity surrounding cryptocurrencies as well. Rotunda, also in his role as the vice chair of North American Securities Administrators Association, is trying to encourage regulatory agencies to adapt to this new way of doing business and investing.

“In both of those roles we’ve been monitoring cryptocurrencies quite a bit,” said Rotunda. “I think what we’re doing right now is we’re adapting to a new way of selling securities.”

The old adage is, after all, “don’t mess with Texas.” Especially when it comes to potentially defrauding investors through cryptocurrencies — but that’s kind of a mouthful.

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Business Finance

Fake crypto scam sends ransomware, then malware once you pay

(FINANCE) Buying unheard of ICOs just got much riskier as scammers find new ways to scam people out of their crypto investments while stealing their identities. Great.

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Cryptocurrency is hot right now. And while cryptocurrencies like Bitcoin are supposedly more secure than regular currency, that doesn’t mean that hackers aren’t looking for ways to take advantage of the trend.

A newly discovered ransomware scam banks on people’s desire to get rich quick by buying cryptocurrencies. The scam advertises a new cryptocurrency called SpriteCoin.

SpriteCoin isn’t a real currency; it’s just a ruse to get people to install ransomware. Often, SpriteCoin ads appear on forums where people learn about and discuss other cryptocurrencies, making SpriteCoin seem like the real deal (hence why social media sites are opting to nix all ads about cyrpto).

The ransomware is disguised as a wallet containing SpriteCoin. While your computer appears to be downloading the blockchain for your SpriteCoin, it is actually encrypting all of your files, while also raiding Chrome and Firefox for your stored passwords. Next, you receive a ransom note demanding that you pay up in order to get a decryption key, or else your files will be locked forever.

The ransom note demands payment in Monero, a cryptocurrency, to the tune of about $100. The note claims that “only we can decrypt your files. Don’t worry, we’ll give you your files back if you pay.”

To add insult to injury, once the Monero ransom has been paid, the hackers install additional malware that harvests personal data and gives hackers the power activate your webcam.

This ransomware scam was discovered by cyber security company Fortinet. Fortinet’s experts think that this scam, which is demanding a (relatively) inexpensive ransom, could be a pilot program for hackers to test out new delivery mechanisms for ransomware and malware. They want to see how many people will fall for the scam before scaling up.

Fortinet also explains that Monero is becoming the new cryptocurrency of choice amongst thieves using ransomware, because Bitcoin transaction fees have gone up and there is typically a delay on payments.

Cryptocurrencies could be a good investment – but make sure you do your research and only buy legit cryptocurrencies, lest you fall victim to such a vicious and repetitive scam.

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