While this may be sufficient for some people, a PO box has some disadvantages if you run a business from home.

Disadvantages of a PO Box

If you want to register your business as an LLC or a C-corp, using a PO box address may not be a good idea. You could use your home address but that exposes you to potential liabilities and you lose your privacy.

Even with real a street address, a PO box address does not give you the professional branding your business might need.

A PO box sits inside a post office in most cases. Your mailbox may get full and you need to empty the mailbox contents periodically.

A virtual business address helps you overcome these limitations. As more people run businesses from home, a virtual business address has become very popular in recent years.

What is a virtual business address?

A virtual business address is an address tied to a prestigious commercial or business building. You can use the address to receive mail not just from USPS but also from FedEx and UPS.

Having a brandable address (eg. 1000 Main Street) gives your business a professional image and confidence to your customers that they are dealing with a reputable company.

You can also use the address on your websites, letterheads, and checks. If you send newsletters and updates to a mailing list by email, you can use the address for CAN-SPAM compliance purposes.

Document management solutions

An added benefit of having a virtual business address is that many companies that offer virtual business address also offer document management solutions. This reduces the amount of paperwork you have to deal with.

If you receive physical mail to your virtual address, the company will scan and upload your physical mail to your virtual mailbox. You can get access to your mail electronically usually in less than a day.  It is almost like picking up your mail every day, except you get it electronically.

You don’t have to store tons of mail and paperwork in your home office. Since the documents are saved electronically, you can retrieve them more efficiently.

Cost

Plans that include a virtual address and document management solutions cost as little as $10 per month. If you get a lot of business mail, it costs a bit more. For example, ipostal1 has a $10 plan that lets you receive up to 30 mail items per month.

Bottom Line

Having a virtual business address gives you many advantages over having a PO box.  For a small cost, you get a reputable physical address that lets you add prestige to your business and gives customers and vendors the confidence that they are dealing with a legitimate company. You can even get your physical mail scanned and uploaded to your digital mailbox.

Form 1099-MISC must be sent to your contractors by January 31st for the prior year in which payments were made.  In addition, you will need to file Form 1096 with the IRS by March 31st.

You can check out the detailed IRS Form 1099-MISC Instructions on the IRS website.

Failure to file or filing the Form-1099 late will result in penalties of $30 to $250 for each form.

When you hire an independent contractor or a vendor, ask them to fill out a W-9 form. This will allow you to get their Tax ID and mailing address. It also avoids last-minute stress of having to find out this information when you are getting ready to issue their Form 1099.

If you use a CPA for your business, he or she will be able to generate form 1099 for your contractors and take care of the necessary filings with the IRS.  But I have always generated Form 1099 myself.  It’s not very complicated but I have to say that the IRS could have made the process a lot simpler than it is.

How To Generate And Mail Your Own Form 1099-MISC

Order blank 1099 forms for free from the IRS

You can order blank forms from the IRS order page.  It takes about 2-3 weeks to get your forms in the mail, so plan accordingly. You will need to get both Form 1099 and Form 1096.  Once you get the forms, you can fill it out and mail Form 1099 to your contractors.  This option does not cost anything but know that it could take you a couple of weeks to issue the forms.

Order blank 1099 forms online or from an office supply store.

You can order the 1099 forms from Amazon or an office supply store, which you can then fill out and mail. Top-selling Amazon  1099-MISC kits can be found as little at $12 to $15.

Use an online service to fill out the information and generate a PDF

There are several online services that allow you to fill out information and print or create a PDF of Form 1099.  The popular one is the one from Intuit. It costs around $14.99 for 3 forms.  Additional forms are $4.

Wagefiling.com also offers a similar service. It costs $3.49 per form.

Efile4biz.com allows you print Form 1099 for $4.50 per form

Use tax prep software for business 

You can easily generate Form 1099 from tax software for businesses such as TurboTax Business.  TurboTax Business is intuitive to use and will generate not only Form 1099 but also other tax forms such as W-2. There is no limit to the number of forms you can generate.

Running a business is stressful.  But generating Form 1099 to stay on the good side of the IRS shouldn’t be too difficult.  Though there are free options, if you are willing to shell out $10 to $15,  you can generate Form 1099 for your contractors in no time.

But you have to face a lot of challenges, too.  You are responsible for handling finances – paying your vendors and receiving money from customers for products or services delivered.

The most popular way small businesses and freelancers to get paid is via PayPal because PayPal is easy to use and almost everyone has a PayPal account.  But PayPal charges a fee every time you receive money.   Remember that the sender typically does not incur any fees if they transfer money out of their PayPal balance.

How much does PayPal charge in fees?

If you receive money from US-based clients, you will be charged $0.30 per transaction + 2.9% of the funds received.

If you receive money from outside the US, you will be charged a fixed fee that varies by country + 4.4% of the funds received

How can you save money on PayPal fees?

1. Use the Standard Transfer option to transfer money to your bank account

Any funds transferred to PayPal stays in the Paypal account.  Most of us need to transfer it to our bank accounts.

If you use the Instant Transfer option to transfer money to your bank account, Paypal charges a 1% fee on the amount transferred.  But the fee is capped at $10.  In this case, you will receive the money in your bank account immediately.

But if you use the Standard Transfer option to transfer money to your bank, the transfer is free of charge.  The downside is that it could take up to two days.  I have been able to receive money in one day using this option.  But it is slower than the Instant Transfer.

If you can wait a few days to get your money by using the standard transfer option, you could save money.

2. Use PayPal debit card

Paypal offers a debit card that allows you to spend money directly from your PayPal account. It’s is just like every other debit card.  You can also withdraw cash from the debit card, up to a limit of $400 per day.

3. Opt to be paid as a friend or family

You need to use this option very carefully because it could be risky for some people.  It is a violation of Paypal terms to receive money as a friend if you are not really friends, and you are engaged in a business transaction.  In addition,  you will lose the payment protection that Paypal provides for business transactions.

If a client pays you using the friends or family option, you will not pay any fees.  This helps you avoid paying all the Paypal fees mentioned above. But you need to work out an agreement with your client for how to send an invoice because you cannot invoice them using  Paypal. The client must also agree to pay as a friend.

This option only works if you receive money from clients occasionally.  If you receive money too often as a friend or family, and Paypal will figure out that you are actually doing business transactions, your account will be shut down.  So use this option cautiously and only rarely.

4. Pass on the fees to customers

It is not uncommon to add a 2-4% surcharge on your invoices to cover your Paypal fees.  Discuss this with your clients before you do this.  Most of them run a business themselves and will understand that there is a cost to doing business and will be willing to pay to cover those costs.

5. Expense on your tax return

When filing taxes, you can expense PayPal fees.  Deduct them in Schedule C of your tax return.

Keep track of all the PayPal fees you have paid over the year.  This prevents problems when it’s time to file taxes

6. Look at Paypal alternatives

While PayPal is ubiquitous, there are other options such as Stripe, Amazon Pay, Google Pay, TransferWise, etc.  Each payment service has its own set of fees and rules.

It might take you some time to get familiar with these new providers.  But it is not a good idea to be bound to a single payment option.  In certain cases, other options can also save you money.

Bottom Line

PayPal is convenient to send and receive money.  When you run a business and receive money through Paypal, you will incur fees.  You have a few options to reduce your fees. Consider getting a Paypal debit card and transferring money from PayPal to your bank account using the standard transfer option.  You can even pass on your PayPal fees to your customers and deduct them from your taxes

Paypal is not the only game in town.  There are other providers who offer similar services.  You don’t want to tie yourself to just one payment option.  In certain cases, other providers may have cheaper options than Paypal.