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. Here are some of things you ought to do when putting ready form 1099. First, the IRS requirement is that you must send form 1099 to all independent contractors you have paid $ 600 or more in a year. An independent worker ought to fill and send the form back to IRS in time as required by law.
Defining independent worker
Plenty of individuals may commit errors because they are not sure what the phrase independent worker means. 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.
Normally, independent contractors are paid on per project basis and are responsible for filing their own taxes. As result, hiring independent contractors is very economical because they work for you but are not classified as your staff. 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
Employers are required to send 1099 forms to independent contractors early in January. End of February is the deadline that employers meet when sending form 1099. If the forms are sent beyond the agreed deadline, the IRS can impose a penalty of around $30 to 100 for each form. If a company doesn’t provide accurate statement to the IRS, they may incur a fine of $250 per form. The IRS may increase the fines depending on the specifics of a given case.
How to prepare form 1099
Employers must ensure that they have correct information before preparing 1099 tax form for each contractor. It”s critical to ask your independent workers if they have updated any personal info like SSN or EIN. For instance, asking contractors to send updated details including the social security numbers is critical.
The form must have the details of all the cash the independent worker has earned in a calendar 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 body that you should not mess 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. Also, you can seek the help of an accountant to manage the entire process if you wish to make things much easier. The worst thing that can happen is to get in trouble with the IRS who can impose heavy penalties per form if you don’t carry out the process properly.