Last year, a poll conducted by Marist College and NPR found that 1 in 5 jobs in America is performed by a worker under contract. There are many benefits to our ever-more flexible workforce for both employers and workers. Flexible work has made business more agile and increased morale for companies across the country. However, if you’ve become more reliant on contract and freelance workers over the past 12 months, you may be in for some added hurdles come tax season.
Many small businesses will be dealing with an influx of 1099-MISC forms come tax season due to the increased use of contractors. Dealing with these forms in a systematic way will eliminate headaches and keep you from scrambling as the deadlines approach.
Since so many business owners will be asking you about 1099-MISC forms and the 1099 process this year, we figured we’d put everything you need to know in one convenient place.
Who needs a 1099-MISC form?
Any entity, whether a person or organization, who you’ve paid more than $600 in the previous tax year should receive a 1099-MISC form. Ideally, you have a list of everyone who needs one ready at hand. If not, you’ll need to contact your clients to get a comprehensive list of qualifying parties.
What to do before you send
Before sending 1099-MISC forms to the IRS, state tax department, and recipient, you need to make sure you have W-9 forms for each party. If they haven’t filled one out, they need to immediately. 1099s need to be sent to contracted workers no later than January 31, so time is of the essence.
It’s also important to verify the contact information you have for all non-employee workers so that they receive their forms. It’s a good idea to email everyone who will be receiving a 1099 to verify their information. You don’t want forms to end up at previous addresses.
Once you’ve verified all contractor information, you’ll need to order the forms from the IRS. Fill out information carefully and double-check that everything is correct before sending the forms. Once they’re sent, there is no going back.
After You Send
While the deadline to send forms to the recipient is January 31, you’ll have some more time to send Copy A to the IRS and state tax authorities. Paper copies are due on February 28 and electronic filings are due April 1. Employers also need to submit their 1099 information as part of their Form 1096 filing.
Luckily, you won’t need to hunt down any more information from your recipients once they’ve been sent their 1099-MISC forms. Their copies are only for their personal income tax filings and their records.
How AccountingSuite™ can help
AccountingSuite™’s accounting and reporting features allow you to store all of the information about contractors in one centralized location. You won’t have to hunt down a business owner for details, which can grind your workflow to a halt. Instead, you’ll be able to quickly and accurately process 1099-MISC forms (with the help of Track1099) for your clients, lessening their burden during tax season and adding value to the services you provide.
You’re probably already in the 1099 muck, but we hope these tips help you navigate the process smoothly. If you’re feeling the burn, consider adding AccountingSuite™ to your tax preparation arsenal. Head to our pricing page to learn more about all the features that will make your life easier both in and out of tax season.