Betts Best Bookkeeping

First, let’s define the word accrual. It means to accumulate something, which in the case of accounting and bookkeeping would be income and expenses. If you sell something, whether it’s a service or a product, and create an invoice to bill your client/customer you are accumulating income at the point of handing over the product or providing the service regardless of the fact the client didn’t pay you at that moment. Therefore, your bookkeeping records should reflect with an invoice for the product or service that you have accumulated or accrued income on that date.

When you purchase a product (other than an asset) or someone performs a service for you, you accumulate or accrue the expense at the time the product is handed into your possession or the service is performed when using the accrual method. The invoice should be dated the same as the date you received the product or the services were rendered. Even though you may not receive the invoice in the mail until days afterward, you enter the date of the invoice in your bookkeeping records because that is when the transaction took place and you began to accrue the expense.

The cash accounting method is simply recognizing income and expenses when products or services are exchanged for immediate payment. Payment can be in the form of cash, check, or a credit card.

Well, for starters one of the points of the 1099-Misc is to inform the IRS that independent contractors and sole proprietors have received revenue from you during the year and the total amount you paid to them for the year. On the other hand, if you receive a 1099-Misc you aren’t required to turn in the piece of paper that is the 1099-Misc form with your tax return as an employee must do with a W-2 form. However, you still MUST report all revenue whether you received a 1099 from a client or not.

When you provide services you should be asked before you’re paid by that client the first time to fill out a W-9 form in order for your client to have the correct legal name, address, and identifying number such as your Social Security number or EIN number (Employer Identification Number) used on your tax return.

If a client doesn’t issue you a 1099-Misc, cover yourself by reporting the revenue you received from that individual or business anyway. There’s nothing you can do about their failure to carry out their responsibilities on this side of the situation, but you can cover yourself by reporting all payments you received from the individual or business.

The total amount of all the 1099-Miscs received by you won’t necessarily match your total receipts for the year because you may have received less than $600 in total payments from some of your clients. Remember, they aren’t required to issue you a 1099-Misc form if they paid you less than $600 in a year.

As a recipient of services you are to issue a 1099-Misc form to anybody to whom you paid $600 or more for services during the year. You should always request they fill out a W-9 form for your files before you pay them the first payment.