If you are an employer that employs the services of independent contractors, then the Internal Revenue Service requires you to meet a number of tax responsibilities. 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. When the independent workers receives the form, he or she must fill it then send back to IRS within the set deadline.
Who is an Independent contractor
Lots of people do not understand the term independent contractor and may make mistakes when trying to comply with the IRS. In short, independent contractors can be explained as part time workers who offer services under the independent contractor agreement conditions.
Normally, independent contractors are paid on per project basis and are responsible for filing their own taxes. As a consequence, engaging an independent worker professionally is quite affordable because they aren’t legally 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 submitting the 1099 tax form
Independent contractors are supposed to receive tax form 1099 by January. Employers are then supposed to send their form by the end of February. The IRS may fine employers up to $100 if the forms are filed past the set deadline. Employers who submit wrong info to the IRS can pay a heavy penalty of $250 or more to the Internal Revenue Services. The IRS has full mandate to increase the fine if they deem it necessary.
Steps for preparing form 1099
Employers must ensure that they have correct information before preparing 1099 tax form for each contractor. It’s a good idea to find out whether the contractor has changed or updated any personal information when filling form 1099. 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 the forms are ready, you need to send the form to each and every contractor that works for you. 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 body that you should not mess with.
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. Also, you can seek the help of an accountant to manage the entire process if you wish to make things much easier. The worst thing that can happen is to get in trouble with the IRS who can impose heavy penalties per form if you don’t carry out the process properly.