Resources – Getting Started & Next Steps
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. The independent contractor must fill the tax form and send it to the IRS by January 31.
Defining independent worker
Plenty of individuals may commit errors because they are not sure what the phrase independent worker means. In simple terms, an independent contractor can be described as temporary staff that may provide services under specific terms or conditions usually outlined under the independent contractor agreement.
Normally, independent contractors are paid on per project basis and are responsible for filing their own taxes. Because of this factor, it is quite cheap to hire independent contractors since they are not technically 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 filling the 1099 form
Employers supposed to send form 1099 to independent workers in January. They are then supposed to return the forms by February 29th. 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 has full mandate to increase the fine if they deem it necessary.
How to prepare form 1099
Employers must ensure that they have correct information before preparing 1099 tax form for each contractor. 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.
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. Keeping some copies with you is important because the IRS may request them. The IRS is an organization that you can’t joke with
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. Also, you can seek the help of an accountant to manage the entire process if you wish to make things much easier. The last thing you want is to get in trouble with the IRS who can fine you lots of money per form.