You are supposed fulfill several tax requirements as mandated by the IRS if you are an employer who uses the services of independent contractors. Here are some of things you ought to do when putting ready 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. When the independent workers receives the form, he or she must fill it then send back to IRS within the set deadline.
Understanding independent contractors
Lots of people do not understand the term independent contractor and may make mistakes when trying to comply with the IRS. 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.
Independent contractors have an obligation to fill their own taxes and are paid based on specific work they complete. 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 filling the 1099 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. If the deadline is missed, then the employer may be fined around $30 to 100 per form. Firms that submit the wrong information to the IRS stand to be fined $250 or upwards per single form. Depending on the particulars of given matter, the IRS may increase fines.
Tips for organizing Tax Form 1099
Employers must make sure that they have the accurate info when preparing 1099 for each and every independent worker. It’s essential to ask all independent contractors if they’ve changed their information. You should for instance request your independent workers to send up-to-date info.
Every form must include all the money the independent worker has earned in a year. Once the forms are ready, you need to send the form to each and every contractor that works for you. Keeping some copies with you is important because the IRS may request 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. Though, if you use various tools the process of preparing form 1099 can be much easier. In addition, you can simplify things further by contracting the services of an accountant. 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.