Running a business is a great way to work on your own and have some control over the things you do and your own income. Many people dream about getting to own their business at some point, but very few think this is even a possibility. But for those who are running their own businesses, there are a ton of things that you have to keep in mind to ensure you are getting everything in place and making the most out of this endeavor.
As a business owner, there are many different types of employees that you will have to deal with to help your business run. If you hire a regular employee, you are responsible for paying them at least the minimum wage, helping out with some other benefits, and even paying some of their retirement and social security. Some business owners do not need a full time employee and may choose to hire an individual to help out for just a few little projects. These are freelancers and independent contractors and it is important that you file the right forms, such as the 1099-MISC for these employees come tax season.
If you hired your first independent contractor recently and are unsure about the right steps to take during tax season, make sure to contact the professionals at L. James and Associates to help you out. This form is pretty easy, but you do need to get it in to avoid penalties and other issues for not filing the right paperwork.
What is the 1099-MISC Form?
This is basically a form that you will fill out telling the IRS that you hired someone who wasn’t your employee and you paid them throughout the year. This income is subject to taxes for the freelancer, not from you, so the individual will need this form in order to complete their taxes at the end of the year. Keep in mind that this form should not stop them from doing their taxes as they should be keeping their own record of income whether or not you send it. In most cases, you will send over this form over if the employee made $600 or more with you during the year, although you can send it over if they made less if you would like for your peace of mind.
In most cases, this form is just going to report how much you paid to the contractor during the year. If you agreed to withhold some taxes for them or offered the contractor some other benefits, there are places to mark this down on the 1099-MISC form. If you are uncertain how to file this report and get it in on time, make sure to contact the professionals at L. James and Associates to help you out.
Not Filing
As a business owner, it is going to be your job to file this report for the individual. If the individual claims that they made this money from you and you never submitted the forms, you could be in some trouble with the IRS for hiding money or other issues. So it is always best to file this form as early as possible and keep good records to ensure that you have this issue taken care of.
The IRS does impose some penalties for not getting this form out to the contractor. You are required to get this form out by the end of February after the year is out. For example, if the employee worked for you sometime in 2015, you need to get the form to them sometime by February of 2016.There is an exception to this though. If you are providing non-employee compensation and click on the box 7 on this form, you need to file the paperwork by January 31st instead.
There are various penalties that will be issued if you do not send out this form on time, or not at all. The company could pay between $30 to $100 per form that is not issued. While this may not seem like a huge deal for just one form, over time this is going to add up and could really cost you. The penalty will vary depending on how far past the deadline you go; if you miss by a few days it won’t be as bad as never filing in the first place. There is a maximum of $500,000 per year for each company. If you purposely don’t send out the form though, it raises up to $250 per statement and there is no maximum to this one.
Filing the 1099-MISC form is pretty easy and should only take you a few minutes in most cases. You simply need to keep track of the amount that you paid each employee throughout the year and then place this into the form before filing and sending it out. The professionals at L. James and Associates are here to answer all of your questions and will ensure that you are getting this form filled out properly the first time.
Running a business can be a lot of work and the time and monetary commitment are not small. Let Lou J Arellano from L. James and Associates help you to get your business taxes done right this year. From big businesses to small, our professionals can take care of you through it all. Contact us today to get started.
