How to prepare Form 1099 online for contract workers: Have you paid a person for contract work? Did you report the payments made to the IRS? The Internal Revenue Service requires you to prepare a 1099 Form for contract workers. If you paid the person $600 or more during the fiscal year as rent, compensation for performing work, interest, then you need to issue the required 1099 Form.
Getting tensed? Don’t worry! We are here to provide you with information about how to prepare Form 1099 online for contract workers. We also let you know about the importance and benefits of filing 1099 online.
What are the consequences to issue Form 1099?
IRS Form 1099 is the information return tax form. Form 1099 Filers report to the IRS and other government agencies about the person named in the form has received taxable payments during the year. It’s one of the IRS’s main weapons in fighting underreporting by the self-employed. Given below are the consequences to issue Form 1099:
Payments to unincorporated contractors
When you made payments with an unincorporated contractor then you need to issue Form 1099. Unincorporated contractors are independent contractors, sole proprietors, members of a partnership, or LLC.
Purpose of work
The work performed by the independent contractors is in the course of your trade or business. You’re not required to file 1099 Forms when the payments are made for non-business-related services.
The most dominant role is the type of compensation paid to an independent contractor. You’re not required to file Form 1099 From for the compensation paid is the minimum threshold of the appropriate Form 1099.
How do you obtain a Form 1099?
You can obtain a Form 1099 from the IRS or another reputable source. Ask the IRS to send you the necessary form by calling or navigating to their online ordering page. Mostly the filers used to mail the Forms through paper forms. They used to buy 1099 Forms at their local office supply stores. These forms are perfectly compatible with IRS.
As in a pandemic situation, it is a high risk to the filers to collect the 1099 Forms at office stores. The IRS provided another way to file 1099 forms with the IRS electronically. You can choose the IRS authorized e-file providers to file your 1099 Forms sitting at your place. Or else if you’re filing less than 250 information returns, you can order the Forms at the IRS website.
Note: You cannot just download a Form 1099 from the internet or the IRS sample page and use it for filling out information. Form 1099 that you send the IRS has to be readable in its scanners. If you send IRS a non-sanctioned Form 1099, you could face a penalty.
Federal Form 1099 filling out the information
When you’re filing the Federal 1099 Form, make sure you have gathered the following information:
Federal tax identification number
A taxpayer identification number is an identification number used by the IRS in the administration of tax laws. It is issued either by the Social Security Administration or by the IRS. A TIN may be Social Security Number, Employer Identification Number, Individual Taxpayer Identification Number, Preparer Taxpayer Identification Number. A TIN must be furnished when filing your tax returns, and when claiming treaty benefits. Fill out your FTIN in the appropriate box.
Request W-9 Form
When you hired the contractor, you should request them to fill out a W-9 Form. If the contractor doesn’t give you their W-9 Form, the IRS expects you to start withholding taxes on their behalf. You’re expected to withhold 28% of the contractor’s pay and then remit it to the IRS.
Enter the amount you paid the contractor throughout the year.
Form 1099 withholding provisions
As a taxpayer, you need to write down the amount you withheld from their pay when you’re reporting the payments to the IRS. You need to indicate how much federal or state income tax you withheld from the contract worker’s pay in box 4. If you work with independent contractors, then you may withhold taxes when:
- The contractor failed to return a W-9 Form or didn’t provide an accurate SSN or another ID number in W-9 Form. In this case, the IRS expects you to withhold 28% of their pay.
- The contractor is a foreign national. The IRS expects you to withhold about 30% of the non-U.S. citizen’s pay. Unless the contractor’s home country is exempted because of a tax treaty with the US.
Filing Form 1099 online prominence
One of the most prominent methods of filing 1099 Forms with the IRS is electronic. This process was provided by the IRS for the convenience of the filers who are facing unexpected penalties when filing more than 250 paper forms. As we know, from the past few years we can see individuals who are working are mostly 1099 workers. They receive a 1099 Form for performing work as an independent contractor. Due to an increase in 1099 workers, filers who choose the traditional method of filing 1099 Forms manually made errors while filing.
To reduce filing risk and make ease to the process of filing, IRS introduces an electronic filing facility to IRS. Filers must choose the IRS authorized e-file providers to file their 1099 Forms online. IRS authorized e-file providers are safe and secured. Through filing form 1099 online, you can upload a bulk amount of files through a single account.
Benefits to filing Form 1099 online
E-filing Form 1099 is both a safe and easy process. Apart from this, you’ll receive your tax returns very fast as well. If you have happened to select the option direct deposit, you might be receiving your tax return in not more than 10 days which would be very convenient for you.
You have the advantage of receiving an email notification about the IRS receiving and accepting your return within 48 hours of form submission. In case if you’ve filed your tax returns previously, you might be having a PIN that you can use conveniently. One of the best things about e-filing 1099 Forms is that you do everything from the comfort of your house and that too at a convenient time.
It’s always best to go for an e-filing service that can be used very conveniently. Coming to the choice of an e-file service provider, Form 1099 Online would be a great choice. Because we enable the new filers to easily and quickly prepare their 1099 tax returns by guiding them through a step-by-step procedure. That’s the info about How to prepare Form 1099 online for contract workers