W-2's and 1099's
Tax Season is officially under way and my caffeine dosage has been increased accordingly. The first items due to Uncle Sam are W-2’s and 1099’s.
W-2’s are due to employees who earned payroll by January 31st. Your payroll provider (who is sometimes your friendly neighborhood accountant) typically processes them. W-2’s and the corresponding W-3 (summary report of all W-2’s issued) are due on February 28th.
1099’s (specifically a 1099-MISC) are sent to all independent contractors (aka freelancers) who were paid $600 or more for the year. There are of course some exceptions to the rule. Corporations are not required to receive 1099’s so if you paid someone who is set up as a corporation, you are not required to send them a 1099. And of course there’s another exception to that (Uncle Sam is such a game player). If that corporation is an attorney’s office, you are required to send them a 1099.
In order to prepare 1099’s the independent contractors must complete a W-9, which can be found at http://www.irs.gov/pub/irs-pdf/fw9.pdf. As a general rule it’s best to obtain the W-9’s prior to paying the independent contractor because trying to wrangle these up in January is often difficult. In addition to the completed W-9, you will need the total amount paid to the independent contractor for the year as this information is reported on the 1099.
1099’s must be sent to each independent contractor by January 31st and the 1096 (the summary of all 1099’s) must be filed with Uncle Sam by February 28th.