IRS Rules on Paying 1099 & W-2 Employees
Companies send out 1099 and W-2 forms to individuals who have done work for them over the course of the year. If a company or person pays another individual $600 or more in wages over the course of the year, he must send out either a 1099 or a W-2 depending on the circumstances of the work done. These forms contain information such as the amount of money that changed hands and the tax ID (either Social Security number or employer ID number) of both the payer and the payee
Online Tax Refund Estimation
1099 or W-2
The first rule that must be addressed is whether a 1099 or a W-2 must be sent. Independent contractors receive 1099 forms, but employees do not. In order to be an independent contractor, the person doing the work must maintain a significant level of autonomy. Labeling someone an independent contractor alone is not sufficient to make that person an independent contractor. The relationship must truly be one in which the worker has a high degree of freedom from the person assigning the work. The Internal Revenue Service looks at three factors in making this determination: financial autonomy (benefits and the way the worker is paid), autonomy in the way the job is performed (how much direction is given) and type of relationship (the presence of a contract). If, on the other hand, an individual is labeled as an employee, a W-2 must be sent out. Employers have additional responsibilities with employees, such as withholding FICA taxes and paying a portion of Social Security and Medicaid contributions for the employee.
Get Free State Tax Calculator
1099 Rules
If there is a true independent contractor relationship, a 1099 is appropriate to send out to those working for you. All contractors who made $600 or more must receive a 1099. The forms must be sent to these contractors by January 31 of the year following the time when the work was done. For example, if an independent contractor did work in 2009, the person who paid him must send out the 1099 by January 31, 2010. Occasionally, this deadline may be extended. For example, in 2010, the deadline was extended to February 16. Anyone sending a 1099 must also send a copy of the form to the IRS. The deadline for sending copies of the form to the IRS is February 28, or April 1 if the form is electronically filed. The 1099 forms must generally be accompanied by a 1096 transmittal form.
IRS Forms 1040 Online
W-2 Rules
W-2s must be filed for all employees. Two copies of the W-2 forms must be sent to the employee (one to include with his returns, one for his records). Another copy must be sent to the Social Security Administration, another to the state taxing authority and another to the IRS. As with the 1099, the W-2 must be sent out by January 31 in the year after the work was completed. The W-2 must contain information about the amount of compensation the employee earned and the amount of FICA, Social Security, Medicare and state taxes withheld from the earned income.
Iowa State Tax Extension
Companies send out 1099 and W-2 forms to individuals who have done work for them over the course of the year. If a company or person pays another individual $600 or more in wages over the course of the year, he must send out either a 1099 or a W-2 depending on the circumstances of the work done. These forms contain information such as the amount of money that changed hands and the tax ID (either Social Security number or employer ID number) of both the payer and the payee
Online Tax Refund Estimation
1099 or W-2
The first rule that must be addressed is whether a 1099 or a W-2 must be sent. Independent contractors receive 1099 forms, but employees do not. In order to be an independent contractor, the person doing the work must maintain a significant level of autonomy. Labeling someone an independent contractor alone is not sufficient to make that person an independent contractor. The relationship must truly be one in which the worker has a high degree of freedom from the person assigning the work. The Internal Revenue Service looks at three factors in making this determination: financial autonomy (benefits and the way the worker is paid), autonomy in the way the job is performed (how much direction is given) and type of relationship (the presence of a contract). If, on the other hand, an individual is labeled as an employee, a W-2 must be sent out. Employers have additional responsibilities with employees, such as withholding FICA taxes and paying a portion of Social Security and Medicaid contributions for the employee.
Get Free State Tax Calculator
1099 Rules
If there is a true independent contractor relationship, a 1099 is appropriate to send out to those working for you. All contractors who made $600 or more must receive a 1099. The forms must be sent to these contractors by January 31 of the year following the time when the work was done. For example, if an independent contractor did work in 2009, the person who paid him must send out the 1099 by January 31, 2010. Occasionally, this deadline may be extended. For example, in 2010, the deadline was extended to February 16. Anyone sending a 1099 must also send a copy of the form to the IRS. The deadline for sending copies of the form to the IRS is February 28, or April 1 if the form is electronically filed. The 1099 forms must generally be accompanied by a 1096 transmittal form.
IRS Forms 1040 Online
W-2 Rules
W-2s must be filed for all employees. Two copies of the W-2 forms must be sent to the employee (one to include with his returns, one for his records). Another copy must be sent to the Social Security Administration, another to the state taxing authority and another to the IRS. As with the 1099, the W-2 must be sent out by January 31 in the year after the work was completed. The W-2 must contain information about the amount of compensation the employee earned and the amount of FICA, Social Security, Medicare and state taxes withheld from the earned income.
Iowa State Tax Extension