Here are four important things you need to know about independent contractors and 1099 taxes before you file your 2020 tax forms.
Will I Receive a 1099 Form?
First, how do you know if you receive a 1099 form? If you are an independent contractor (or self-employed) you are not considered an employee for an organization. 1099 forms are issued to report non-employment income. You will be able to file your taxes as a business entity or individual depending on how you filled out the W9 form. Business entities will have the tax identification number (TIN) while individuals would use their SSN when filing taxes.
1099-MISC vs. 1099-NEC
Secondly, the IRS has replaced the old 1099-MISC with the new 1099-NEC for reporting non-employee compensation. Let’s face it, the old 1099-MISC form was…dated. The 1099-NEC is a facelift version of the 1099-MISC. The new form is available online. Businesses have until February 1, 2021 to provide recipients with their 1099 forms. Partners may be receiving 1099-NEC, 1099-K or both forms depending on the office you partnered with.
Don’t Wait Until the Last Minute
Thirdly, what are you waiting for? As an employer, many forms can be filled out as early as the fourth quarter. With the IRS, you don’t want to miss any deadlines or have errors occur. 1099 taxes are complicated. Be smart and get an early start. Help support the process and avoid penalties by filling forms early and without errors. Currently, the IRS filing deadline has been extended to May 17, 2021.
How to File Your 1099 Taxes
Finally, how to file your tax return? There are many programs out there to file online, some programs have a fee and others are free. The IRS offers Free File Alliance as an online solution to e-file. If you are an independent contractor, some companies offer discounts to use their exclusive online partner.
By partnering with DDI, we can simplify your tax season with independent contractors. From the beginning we collect and file important documents from the independent contractor. We establish a cadence to input necessary information to generate the 1099 tax form.
Furthermore, our dedicated team is proactive in reaching out to independent contractors to ensure a seamless process. We provide 1099 forms in advance, online and follow-up several times to ensure delivery. For the employer, we keep the forms and other tax records in case of an audit. Additionally, our risk management team stays up to date on 1099 compliance and can provide legal support if needed.
In conclusion, at DDI, we handle everything from your 1099 payroll, 1099 taxes and provide customer service to 1099 independent contractors for you!