You are supposed fulfill several tax requirements as mandated by the IRS if you are an employer who uses the services of independent contractors. This article talks about some of the things you must fulfill when organizing form 1099. Firstly, you must send tax form 1099 to an independent contractor you’ve paid $600 or more in 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
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.
Usually, independent workers are renumerated per project and fill taxes on their own. 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. Firms that submit the wrong information to the IRS stand to be fined $250 or upwards per single form. The IRS may increase the fines depending on the specifics of a given case.
Tips for organizing Tax 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. You should for instance request your independent workers to send up-to-date info.
Each form must include the amount of money you paid the contractor plus SSN or EIN. 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 tough organization.
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. 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.