Tag Archives: 1099-INt

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Your business is up and running and you’re finding yourself getting busy. You know you need morehelp, but you’re unsure if you want to hire an employee or bring in an independent contractor.  You might also be wondering the difference between the two. It’s very important to discern the status of these workers as that status makes all the difference for your company and your taxes.
1099
 We’ve compiled a list of the primary differences between the two and have listed them here for your reference. We hope you find it helpful as you decide which is best for your business.

  1. By law, you’re required to withhold taxes for an employee. These include Social Security and Medicare taxes as well as the unemployment taxes you’ll need to pay for an employee.  There are no such requirements for an independent contractor.
  2. An employee is obligated to follow the rules of the company about when they work, how they work, and where they work.  An independent contractor provides a service but is given little instruction about how or where to work.
  3. An employee rarely has the opportunity to hire people to work under him if the workload is too intensive, where as an independent contractor has that ability.
  4. An employee is typically paid an hourly wage or a salary with a specified pay schedule.  An independent contractor is paid for the service he provides in a lump sum.
  5. For an employee to travel or go above and beyond normal duties, you, as the employer must reimburse the employee for mileage or travel expenses.  An independent contractor incurs their own expenses as those are typically built into the fees for the project.
  6. Unless otherwise approved by you, an employee typically works only for you.  An independent contractor may work for many different people and/or businesses.
  7. For an employee, the employer is required to provide the equipment needed to get fulfill the job duties whereas independent contractors provide their own equipment.

Hiring an employee or an independent contractor comes down to a matter of preference. And there are many nuances to each of these factors. We recommend consulting an attorney for specific legal advice and guidance before proceeding.

Should you decide on independent contractor, be sure to check out the services we offer for filing the required tax documentation – a 1099.

Resources:
IRS
Legalzoom
MDC

Hiring a Seasonal Employee: Know the Rules First

Rajeev blog photoIf you’ve got a business operating on limited hours, then chances are you’ll need to hire a seasonal employee. Before you hire, make sure you’re educated! You don’t want to hire someone and have to redo all of the paperwork or be responsible for the taxes you didn’t take out.
Here are some tips and tricks to help you out when tax seasons rolls around again.

1. Make all employees responsible for filling out the proper tax forms for their type of employment. If you have questions, the IRS and DOL have incredibly user friendly websites that can help you determine what forms you will need for each type of potential hire.

2. Seasonal is a time limit, not necessarily an employment status. Seasonal employees are able to work full time hours. You are able to utilize your seasonal staff for full time labor, as long as you comply with labor laws.

3. Within the Department of Labor, seasonal employees have the same rights as regular employees. You are still subject to wage laws with a seasonal employee. You don’t want to be responsible for an unfair workplace violation due to mistreatment of a seasonal employee.

4. Know the difference between a seasonal employee and an independent contractor. A seasonal employee is one who is hired into your company on a seasonal basis, for example: spring harvest season or the end of year holidays. An independent contractor is someone who works as needed for a company under terms specified in a contract or agreement.

5. Ensure that your seasonal hire is not surprised by the termination of their position at the end of their season. Avoid the snafu of wrongful termination by supplying your seasonal employee with clear cut terms and conditions regarding the basis of their hiring within your company.

All too often, companies can fall victim to tax complications as a result of hiring seasonal employees. Before hiring, do your research using all of the options afforded to you including the IRS and DOL websites. Don’t get caught up in complicated legal battles and owing taxes for employees that you under-taxed. As always the best offense is a good defense. Know your rights and know the rights of your employees. Make sure that you issue a form 1099-MISC at the end of the year to all your contractors, just like you would issue a W-2 to all your employees.

When it comes to tax time, contact us for assistance with your e-filing tax needs.

Sources:
http://smallbusiness.chron.com/ways-pay-seasonal-employees-13816.html
http://www.dol.gov/dol/topic/workhours/seasonalemployment.htm
http://www.optimum-solutions.com/payroll/part-time-seasonal-and-temporary-employees
http://www.moneythinking.com/2010/12/30/tax-tips-for-seasonal-employees/

Requirements And Information On The Various 1099 Forms, And When To Use Which One

Almost all businesses will only have to worry about the most common 1099, the 1099-MISC. This form will be used for the most part to pay for labor and services by small businesses, independent contractors, doctors or health clinics.

Corporations are for the most part exempt from this, except for legal and medical corporations. You also must file a 1099 form for any monies paid to an attorney or crew members of a fishing vessel.

Payouts of substitute dividends, royalties or tax-exempt interest will also demand a 1099, as well as the sale of products for resale worth $5000 or more to a retailer who does not have a permanent establishment.

The forms must be filed by February 28th in 2013. This date usually falls in the last week of February if you are filing by paper, and 30 days later if filing electronically. The electronic filing date for 2013 falls on April 1, 2013.

You will need the Social Security Number or the TIN of the business with whom you are filling to form out to. Many small business owners use their SSN, so don’t be surprised if that happens. The TIN is a federal Tax Identification Number.

The 1099 form is the way the government is trying to track income which had been very hard to trace previously, and while there is some extra paperwork, the reporting data is not that hard to adhere to. Online File Taxes can help you with every aspect of your 1099 situation, and help you to make sure that you file the correct 1099 and that their reporting is accurate.

Some of the other 1099 forms are below:

• 1099-INT

• 1099-R

• 1099-B

• 1099-DIV

• 1099-C

• 1099-S

The letter designation behind the 1099 usually gives a clue as to what the form is for. 1099-INT, for instance, is issued by banks and other financial institutions to show how much interest income you’ve had – for instance, from a CD.

If you are forgiving, or canceling a loan, you will issue a 1099-C whether or not the person who had the loan can count that as income. The 1099-S deals with the sale of real estate, while a 1099-DIV deals with dividend income.

Also, as you draw money out of a retirement or pension plan, a 1099-R will be issued so that the taxes can be paid on the money drawn out.

The 1099 form, if used properly can be a good thing to your taxes – it is a much more reliable form of record keeping for expensing purposes. The penalties can be stiff, but if you are keeping decent records the 1099 reporting requirements will not add a huge amount of effort to your tax routine.

Online File Taxes can make sure that all your 1099 requirements are being met, and can do it in paper or e-filing form. Remember, if you have over 250 1099 forms, you must file them electronically.

Go to our website now to see how we can help you with the new 1099 requirements, and any tax service you may need!

I’M NOT SURE IF I SHOULD USE A 1099 – HOW DO I KNOW FOR SURE?

The 1099 form covers many different types of payments made to individuals or companies, and there are different requirements and different forms that will cover them. There is a long list of these, such as the 1099-PATR, which is used for ‘Taxable Distributions Received from Cooperatives’.

For the vast majority of individuals and businesses, though, the 1099 requirements are quite simple (compared to many IRS rules). If you pay more than $600 for legal services or other professional services, or for any subcontractor you must issue a 1099 for that person or business.

You also must issue a 1099 for any rents paid for real estate. This applies to any real estate rented, no matter what the purpose is.

The $600 is cumulative as well. If you pay John Sloan Network Specialist 4 smaller amounts of $235 per service, he will still need to receive a 1099 because he received a total of $940. Anything above $600 that you are paying to any independent contractor or for any services must be reported, no matter how the money is broken up.

1099 requirements also include gaming prizes, royalties from the sale of physical or intellectual property.

Most of the other types of 1099 forms are used by specific industries or institutions. This includes sub forms like the 1099-INT, which designates interest received from investments like treasury bonds, stocks, notes and more. Depending on your investment structure they would be the ones handling this form.

The 1099-MIC is the most used form and as a business or an individual that is most likely the one you will see. For a business, there are some exceptions to the $600 rule. They include payments to corporations except under very specific conditions.

Wages paid to regular employees are already covered by W-2 forms.

Business travel allowances and per diem expenses do not fall under 1099 reportable payments.

You do not have to track money spent on merchandise, freighting, storage or telephony. And, if you rent from a real estate agent you do not have to report that via 1099; it is their job to issue the 1099 to the landowner.

The 1099 form is used for trade or business reporting only. Personal payments are not reportable. According to the IRS, you are engaged in a trade or business when you operate for profit or gain.

Payments made for life insurance protection or to a tax exempt organization (such as an IRA), and ‘payments made to or for homeowners from the FHA Hardest Hit Fund . . . or other similar state program’ (from the IRS, instructions on 1099).

One more requirement which will only apply to a small number of businesses that are engaged in wholesale as well as retail operations. If you sell over $5000 of consumer products (let’s say leather knife sheaths) to a buyer so he can resell the goods and he does not have a permanent retail establishment you must report the sales via a 1099 form.

This type of client may be on a mobile circuit, such as a fair or some other type of traveling business like Renaissance Fairs. It applies to anyone who buys wholesale from you who does not have a permanent brick and mortar operation.

The golden rule is the $600 rule. If you paid a contractor or other service, you will need to issue a 1099. If you do not you will not be able to deduct that person’s work on your taxes.

If you are a contractor, keep track of how much people pay you. If you did over $600 for any company, it is more than likely that they will be sending their form 1099 in, even if for some reason you don’t get it.