If you are an employer that employs the services of independent contractors, then the Internal Revenue Service requires you to meet a number of tax responsibilities. The following article mentions a few things you should follow when preparing tax form 1099. First and foremost, you are required to send tax form 1099 to all independent workers that have earned $600 and above from you in a calendar year. An independent worker ought to fill and send the form back to IRS in time as required by law.
Who is an Independent contractor
Because many people are not clear about the term independent contractor, it can be quite easy to error. In a nutshell, an independent worker can be defined as temporary worker that offers services in exchange for money under certain conditions subject to the independent worker contract.
Usually, independent workers are renumerated per project and fill taxes on their own. As a consequence, engaging an independent worker professionally is quite affordable because they aren’t legally your employees. Employers must be clear on the issue of independent contractors or employees because any confusion can lead to penalties by the IRS.
Deadline for submitting the 1099 tax form
Independent contractors are supposed to receive tax form 1099 by January. Employers are then supposed to send their form by the end of February. The IRS may fine employers up to $100 if the forms are filed past the set deadline. Firms that submit the wrong information to the IRS stand to be fined $250 or upwards per single form. The IRS has full mandate to increase the fine if they deem it necessary.
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. You should for instance request your independent workers to send up-to-date info.
The form must have the details of all the cash the independent worker has earned in a calendar year. Once the forms are ready, you need to send the form to each and every contractor that works for you. But ensure that you keep a copy of the documents you send just to be safe because the IRS may need them. The IRS is tough organization.
Ultimately, the preparation of 1099 forms for your independent workers can be a tedious process. However, it is possible to make the entire process much simpler if you utilize software. In addition, you can simplify things further by contracting the services of an accountant. If you do everything according to book, then heavy fines may be imposed on you by the IRS.