If you are a small business owner who pays independent contractors, service providers and other individuals for freelance or contract work, you are required to issue IRS Form 1099. These forms are sent to any individuals who you’ve made payments to in order to be used in their own tax filing.

The information on Form 1099 is also reported to the IRS so that the information can be matched to the individual’s tax return and ensure that the income is being reported properly.

If you don’t issue 1099s, you will pay noncompliance penalties to the IRS.

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The tax deadline to file your 2011 tax return is April 17, 2012. If you are unable to file your return by the due date, in most cases you will want to file for an automatic tax extension.

Here is a look at all that you need to know about filing for a tax extension, along with any special filing circumstances that you may qualify for:

What is a Tax Extension?

A tax extension buys you extra time to prepare and file your tax return. When you file for an extension, it is typical for the the IRS to automatically grant you an additional six months to file your return. If you file for a tax extension for the 2011 tax year, your new due date will be October 15, 2012.
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There is generally some confusion as to how bonus income is taxed. Many people mistakenly believe that the bonus they receive from their employer during the holiday season is taxed at a higher rate than regular income. Others believe that a year-end bonus could bump them into a higher tax bracket, resulting in their being subject to a higher tax rate on their total income for the year. Fortunately, however, neither scenario is necessarily true.

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If you’ve been doing your research on tax credits and deductions, some of the sources that you’ve come across might mention that you’ll want to watch out for the AMT when using them. The alternative minimum tax (AMT) system is intended for higher-income taxpayers, but over time has come to affect middle-class families as well, and if you trigger it, it can be very expensive.

Let’s take a look at what the AMT is, why you need to be aware of it, and how it can be triggered.

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The 2012 IRS mileage rates vary depending on whether you are claiming mileage for business travel, moving expenses, charitable work or medical-related traveling. Each category of travel has its own mileage rate used to calculate the tax deductible expenses related to driving your vehicle.

IRS mileage rates are determined through analysis of fuel prices, average driving expenses, car maintenance and registration costs. When the IRS calculates the business mileage rate, it does so using both fixed car expenses and variable car expenses, while rates for medical, moving or charitable work travel are based on variable expenses only.

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The IRS has filed a $258,017 tax lien against Redskins wideout Santana Moss.

The lien comes as a result of more than $250k in taxes that the 11-year NFL veteran neglected to pay back in 2006, despite his earning more than $1.9 million that year.

The Detroit News reports that the tax lien was filed against Moss’s $5.2 million Florida home on November 22nd in Broward County Circuit Court.

The tax lien isn’t the first financial hardship that Moss has faced in 2011; he was sued for $308,870.64 in back rent by a Florida businessman earlier this year.

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When you’re working for your employer on the road or from a home office, you’re likely to run up a lot of expenses, some of which may not be reimbursed by your employer. It is crucial that you do not throw away the receipts for those expenses.

By keeping track of your business expense documents, you can add them to your itemized deduction, which will increase your tax refund. These expenses are included in the miscellaneous itemized deductions at the bottom of your Schedule A.
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The price of medical care in the U.S. can run into the thousands of dollars each year for routine care once you factor in the cost of insurance premiums, co-payments and medications.

In addition to the already hefty expense, some families are also faced with extremely costly medical conditions or diseases, which require medical expenses that can quickly add up to what, for many, is an unaffordable cost.
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The IRS has announced that interest rates will not change for the first quarter of 2012, which begins on January 1, 2012 and goes through March 31, 2012.

Interest Rates for Q1 2012

IRS interest rates will continue to be charged as follows:

• 3% for overpayments (2% for corporations)
• 3% for underpayments
• 5% for large corporate underpayments
• 0.5% for the portion of a corporate overpayment in excess of $10k.

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If you are an employer or some other entity that makes payments, you must withhold taxes from your employees’ paychecks and certain other payments that you issue. However, you must also be aware of any additional taxes that you may have to withhold.

For payees who do not furnish a correct Tax Identification Number (TIN), you may be required to exercise the backup withholding tax rate.

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