If last year was the first year that you experienced outsourcing work or hiring a contract, you may not be aware of your responsibilities when it comes time to file your business taxes. However, the Internal Revenue Service will still hold you responsible for taking care of the following tasks.
Send 1099s
Instead of providing individuals such as a freelance photographer, writer, graphic designer, accountant or attorney a W-2 form, you must usually send him or her a 1099 form. This form is used when you pay someone who is not your employee for whom you pay employee taxes. These forms must be provided to any individual to whom you provided $600 or more in compensation for the tax year.
Pay Attention to Deadlines
1099 forms must be mailed to contractors and freelancers by January 31 of the year immediately following the year that they were paid. You are then required to file these forms with the Internal Revenue Service by the last day of February. If you do not file these forms in time, the Internal Revenue Service may impose a penalty.
File Online if You Wish
2015 was the first year that the Internal Revenue Service allowed businesses to file their 1099 forms online. It has a FIRE system that allows it to receive this digital information. However, you must fill out an additional form that you must fax or mail before you will be eligible to utilize the online system. However, Intuit provides an alternative to this option. You can use the 1099 filing if your accounting software includes this option. QuickBooks Payroll also offers an online filing service for 1099 forms for a low fee so that you can print out your forms and mail or email them to your contractors. You can also send the forms electronically to the Internal Revenue Service. This option is particularly attractive if you are getting close to the filing deadline.
Plan Ahead
Send out W-9 forms ahead of time to your freelancers and contractors so that you can get their pertinent information such as their Social Security numbers. This will speed up the process so that you have the information that you need in order to prepare a 1099. Once you hire contractors who will earn $600 or more by working for you, send them the form at the beginning of the process. Scan the forms so that you have a digital copy next year.