We all want to start a new year without worries or stressors. So, to have a happier start for the new year, we’re here to look at helpful financial advice and tips on how and when to use the right tax documents.
We want to help you avoid unnecessary penalties and make you informed.
Nonetheless, dealing with too many forms, legalities, and other necessary paperwork can be too much. A more intelligent approach is to hire a certified public accountant to handle all your annual tax obligations.
You will read below an informative write-up for you if you are a business owner, a rental property owner, or an employee.
Start with knowing what a 1099 is and when to use it.
Form 1099-NEC is a tax form used to report non-employee compensation paid to individuals or unincorporated businesses. This form is typically used to report payments made to independent contractors, freelancers, and other self-employed individuals.
As the person or business responsible for issuing the 10099-NEC, it is important to gather accurate information and complete the form correctly to ensure compliance with federal tax laws. This may involve keeping detailed records of payments made throughout the year, as well as obtaining the necessary taxpayer identification information from recipients.
Are you a business or rental property owner?
Did you pay more than $600 to individuals that are not your employees? The “non-employee compensation” requires you to provide form 1099-NEC to those workers by January 31.
How can you avoid getting penalties and conflicts?
File Form 1099-NEC by January 31 and send copies of the 1099-NECs form to the IRS. Note that the 1099-NEC form should be on optically scannable or OCR forms.
These tasks can be tedious, especially if you need to do this over ten times. Hiring professionals like certified public accountants will make the job easier.
What if my rental property is an investment, not a trade or business?
If you are a property owner that classifies a rental as an investment, you are not generally required to provide IRS Form 1099. However, if you are a landlord using the property as a business income, you must file Form 1099-NEC.
How will you deal with your future potential vendors, contractors, and other service providers?
We strongly advise you to let them fill out a W-9 form on your first meeting or before engaging in business with them.
By doing this, you can already have a copy of their full name, address, type of business entity, citizenship status, ID number certifications, and TIN, Social Security Number, or Employer Identification Number.
What are other essential things to know about 1099-NEC?
- Take note that they also have the W-9 form in the Spanish language.
- The 1099-NEC worker does not apply to household workers because they are considered employees.
- The penalties can range between $50 to $290 for each late filing of 1099-NEC
- All 1099-NEC forms must be filed electronically or on special optically scannable forms.
Other Forms to File
- Form 1098 or the Mortgage Interest Statement are due by January 31
- Form W-2
- As an employer, you must provide your employees copies of W-2 forms.
- If the employee receives this electronically, the employer posts it on a the site and notifies the employee
- The W-2 Copy A and Transmittal Form W-3 filed electronically or by paper are submitted to the Social Security Administration by January 31
- Form 941
- This is for any undeposited Social security, Medicare, and withheld income tax.
- The fourth quarter of December 2022 is the time to submit this.
- If you have deposited this on time and in full, you have until February 10 complete the process.
- Form 1040 or Form 1040 SR
- This type of form is for individuals who must make estimated tax payments.
- You may file your income tax by January 17.
- If you file earlier than January 31 or by January 31, you prevent yourself from getting penalties.
- If you cannot file your tax by January 31, file it and then pay it by April 18.
- Form 945
- Form 945 is to report the income tax for 2022 on all non-payroll items, like backup withholding and withholding on pensions, annuities, and IRAs.
- Deposit or pay any undeposited tax.
As an employee or a business owner, here are more relevant forms you may required to file and should seek the help of a next-level bookkeeper or CPA for clarification and direction:
Got any more questions?
Reach out to Carefree Bookkeeping for an initial free consultation and CPA referral to help you get 2023 off to rock-solid start this tax season!
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