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. 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.
Understanding independent contractors
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.
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.
Due date for sending 1099 form for employers
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. Employers who submit wrong info to the IRS can pay a heavy penalty of $250 or more to the Internal Revenue Services. Depending on the particulars of given matter, the IRS may increase fines.
Steps for preparing 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. For example, requesting contractors to send their updated personal 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. 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.
It can be quite tiring to prepare 1099 forms for all independent contractors. However, it is possible to make the entire process much simpler if you utilize software. An accountant can help manage the whole process of filing 1099. If you do everything according to book, then heavy fines may be imposed on you by the IRS.