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. The independent contractor must fill the tax form and send it to the IRS by January 31.
Understanding independent contractors
Because many people are not clear about the term independent contractor, it can be quite easy to error. 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. The IRS can impose penalties on employers who confuse issues regarding employees and independent workers.
Due date for sending 1099 form for employers
Independent contractors are supposed to receive tax form 1099 by January. They are then supposed to return the forms by February 29th. The IRS may fine employers up to $100 if the forms are filed past the set deadline. If a company doesn’t provide accurate statement to the IRS, they may incur a fine of $250 per form. The IRS may increase the fines depending on the specifics of a given case.
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.
The form must have the details of all the cash the independent worker has earned in a calendar year. After organizing your form, send it to all your independent contractors. 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 an organization that you can’t joke 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. If you do everything according to book, then heavy fines may be imposed on you by the IRS.