2 weeks more and that’s it…2011 ends after 15 days and we welcome 2012 in our lives with new beginnings, new activities, new promises and resolutions and not to forget a new filing season. January 2012 is not only a time for celebrations but also a time to gather your papers and yourself to begin your income tax filing. But before that, if you are self employed or provide your services on freelance basis, then your hiring company would definitely provide you form 1099 Misc. Wondering what is form 1099 misc and why should I receive it? Ok, so here’s the answer to that. 1099 Forms are basically designed for freelancers or self employed who render their services to companies and in return receive remuneration of $600 and above. If you fall into that category then a 1099 misc form is sure to come your way.
Once you receive 1099 misc form, then at the time of filing your income taxes with IRS, you have to show the 1099 misc form as well. This will allow you and the IRS to figure out your taxable income.
As I said earlier, 1099 Misc forms are designed for freelancers and independent contractors. A person falls under the category of an independent contractor/freelancer if he sets his own schedules, works at his own timings, location and is free to work for other individuals or businesses that suit his needs. If issues arise in any of the conditions or the person is being directed with any of the conditions then he is deemed as a employee of the company and is not liable to receive 1099 misc form but rather will receive a form W2 (for employees)
Filing 1099 misc forms with IRS
Every year businesses have to prepare a vast number of 1099 forms and provide a copy of each 1099 form to their payees/recipients, so that they can use it for their income tax purposes. Moreover, besides providing a copy to payees, businesses also have to file one copy with the internal revenue services for their record. Considering that businesses have to prepare a huge number of 1099 forms every year, thus IRS has made it compulsory that businesses who have to file 250 and above 1099 forms will have to mandatorily use electronic filing system to file 1099 misc forms. Efiling 1099 forms is actually a quick, easy and secure method to file tax form 1099 misc. Filing deadline for 1099 electronic filing payers is April 2nd 2012. Although you can efile 1099 forms on your own, but it would require you to download the software and then efile. However, one such company that has come up with advanced efiling software for 1099 filing is 1099online.com. You can learn more about their efiling offerings and services at 1099online.com.
Penalties associated with 1099 filing:
If you fail to file a correct information return by the due date and you cannot show reasonable cause, you may be subject to a penalty. The penalty applies if you fail to file timely, you fail to include all information required to be shown on a return, or you include incorrect information on a return. The penalty also applies if you file on paper when you were required to file electronically, you report an incorrect TIN or fail to report a TIN, or you fail to file paper forms that are machine readable.
The amount of the penalty is based on when you file the correct information return. The penalty is:
- 1) $30 per information return if you correctly file within 30 days (by March 30 if the due date is February 28); maximum penalty $250,000 per year ($75,000 for small businesses, defined below).
- 2) $60 per information return if you correctly file more than 30 days after the due date but by August 1; maximum penalty $500,000 per year ($200,000 for small businesses).
- 3) $100 per information return if you file after August 1 or you do not file required information returns; maximum penalty $1,500,000 per year ($500,000 for small businesses).
As a reminder to businesses who have to issue 1099 misc form to independent contractors/freelancers they have paid $600 and above, the filing period starts January 2012. The due date to send 2011 form 1099 to recipient is January 31st and the efiling deadline is April 2nd 2012. It’s best that you comply with all the rules and conditions to file 1099 forms so that you are not burdened with penalties. You can find out more about your filing of IRS 1099 forms from the IRS website or a reputed and IRS authorized service provider like 1099online.com