January can be a stressful time for businesses! Many clients scramble to file 1099’s and W-2’s, right after the lazy days of the holiday season.
Here’s how you can prepare in advance to avoid the headache!
(If you only hired contractors, scroll down a bit to the second list.)
HIRED EMPLOYEES:
Requirements:
Obtain a signed W-4 form and I-9 form, if applicable, from all employees. Ask them to fill out a new W-4 form each year to ensure you have their most up to date information.
You used a payroll service provider (like ADP or Gusto):
Download the quarterly and annual federal payroll tax returns that the service filed for you. Look over them to make sure they’re correct.
Look over the tax payment history to ensure that the payroll service provider paid all federal and state tax deposits on time and that they actually cleared your bank account.
Look at your settings to make sure that the payroll service will automatically e-file the W-2 forms with the IRS. They may require your approval before e-filing, so learn what their protocol for approval is.
Look at the draft versions of the W-2’s to make sure the names, addresses and total compensation reported on the forms are correct.
If the W-2 forms have errors, contact your payroll service to let them know that you need to make changes to the draft forms.
If the payroll service is unable to make changes, then tell them to disable the automatic filing of the W-2’s.
We can prepare the correct W-2 forms utilizing our tax preparation software.
Keep a digital and physical copy of all of these records in a safe place for at least the next four years in case of an audit or government inquiry. Some payroll service providers will mail you copies, but you likely will need to download them directly.
You did not use a payroll service provider (like ADP or Gusto):
File all quarterly (941) and annual (940) federal tax returns, as well as all state quarterly and/or annual reports.
Pay all federal tax deposits through the IRS’s EFTPS system, and make sure that the payments cleared your bank account. Pay your state’s unemployment taxes, if applicable.
Prepare W-2 forms for each employee by calculating wages, benefits, withholdings for taxes and other deductions or compensation.
If you need help, we can prepare these W-2 forms utilizing our tax preparation software.
Keep a digital and physical copy of all of these records in a safe place for at least the next four years in case of an audit or government inquiry.
HIRED CONTRACTORS:
Requirements:
Obtain a signed W-9 form from each contractor, and ask for a new one each year to ensure that you have the contractor’s most up to date information.
Make sure your bookkeeping is up to date, and each payment has the contractor’s name assigned to those payment transactions.
We can catch up your bookkeeping, just reach out!
There are new-ish rules for what kind of 1099 form you should use, depending on the type of contractor you hired.
1099-NEC is now the most common form used, since this is for the type of contractors hired for outsourced work, such as construction subcontractors or remote admins.
1099-MISC is now reserved for other special types of hires, such as attorneys.
If you aren’t sure which one you need to use, feel free to reach out for a consult!
If you paid Contractors through a payroll service provider (like ADP or Gusto):
Look at your settings to make sure that the payroll service will automatically e-file the 1099 forms with the IRS.
Look at the draft versions of the 1099’s to make sure the names, addresses and total compensation reported on the forms are correct.
They may require your approval before e-filing, so learn what their protocol for approval is
Payments to contractors that are an exact reimbursement for materials or supplies should not be included in the total non-employee compensation amount.
If the total amount showing on the draft 1099 form is incorrect, then notify the payroll service provider.
We can prepare and e-file correct 1099 forms using our tax preparation software.
If you have not paid Contractors through a payroll service provider (like ADP or Gusto):
Prepare the 1099’s and e-file them, or print on 1099 forms and mail them to the IRS.
If you need help, we can prepare and e-file 1099 forms using our tax preparation software.
Keep a digital and physical copy of all of these records in a safe place for at least the next four years in case of an audit or government inquiry.