If you are an employer that works with independent contractors, then you have certain tax obligations that you must fulfill as required by the IRS. The following article mentions a few things you should follow when preparing tax form 1099. Firstly, you must send tax form 1099 to an independent contractor you’ve paid $600 or more in year. The independent contractor must fill the tax form and send it to the IRS by January 31.
Who is an Independent contractor
Plenty of individuals may commit errors because they are not sure what the phrase independent worker means. In short, independent contractors can be explained as part time workers who offer services under the independent contractor agreement conditions.
Normally, independent contractors are paid on per project basis and are responsible for filing their own taxes. As a consequence, engaging an independent worker professionally is quite affordable because they aren’t legally your employees. The IRS can impose penalties on employers who confuse issues regarding employees and independent workers.
Deadline for filling the 1099 form
Independent contractors are supposed to receive tax form 1099 by January. End of February is the deadline that employers meet when sending form 1099. If the deadline is missed, then the employer may be fined around $30 to 100 per form. Employers who submit wrong info to the IRS can pay a heavy penalty of $250 or more to the Internal Revenue Services. The IRS may increase the fines depending on the specifics of a given case.
Tips for organizing Tax Form 1099
For each and every worker, employers ought to make sure that they get the correct data. It’s a good idea to find out whether the contractor has changed or updated any personal information when filling form 1099. For instance, asking contractors to send updated details including the social security numbers is critical.
Every form must include all the money the independent worker has earned in a year. After organizing your form, send it to all your independent contractors. But you must make sure you remain with the copies of the forms you send out just in case the IRS needs them. The IRS is an organization that you can’t joke with
Lastly, preparing the 1099 forms for each and every contractor can be quite tiring. But you can make the process a bit easier by using various tools in the market. In addition, you can simplify things further by contracting the services of an accountant. The last thing you want is to get in trouble with the IRS who can fine you lots of money per form.