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. 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. An independent worker ought to fill and send the form back to IRS in time as required by law.
Understanding independent contractors
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.
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
Employers supposed to send form 1099 to independent workers in 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. The IRS may increase the fines depending on the specifics of a given case.
Steps for preparing form 1099
For each and every worker, employers ought to make sure that they get the correct data. 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.
Every form must include all the money the independent worker has earned in a year. Once you finish preparing the form send it to all the independent workers working for you. But ensure that you keep a copy of the documents you send just to be safe because the IRS may need them. The IRS is tough organization.
Lastly, preparing the 1099 forms for each and every contractor can be quite tiring. 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. If you do everything according to book, then heavy fines may be imposed on you by the IRS.