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. 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.
Independent contractors have an obligation to fill their own taxes and are paid based on specific work they complete. 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
Independent contractors are supposed to receive tax form 1099 by 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.
Tips for organizing Tax 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. 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. Once you finish preparing the form send it to all the independent workers working for you. Keeping some copies with you is important because the IRS may request them. The IRS is tough organization.
Ultimately, the preparation of 1099 forms for your independent workers can be a tedious process. Though, if you use various tools the process of preparing form 1099 can be much easier. An accountant can help manage the whole process of filing 1099. The last thing you want is to get in trouble with the IRS who can fine you lots of money per form.