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A 1099 employee is an independent contractor. The phrase refers to self-employed workers. The phrase emanates from the fact that they have to fill their tax returns on Form 1099. They use the form to file all the income they earned in the course of the year. Thereafter, they submit the report and any other pertinent information to Internal Revenue Service (IRS). Because they are in self-employment, they no longer use Form W-2 for purposes of communicating their tax returns to the IRS. Instead, they use 1099 Employee form. 

1099 Employee Form example
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Who Fills 1099 Employee Forms?

Those who should fill 1099 employee form include the following: 

  1. Carpenters
  2. Doctors
  3. Dentists
  4. Childcare workers
  5. Veterinarians
  6. Lawyers
  7. Accountants
  8. Contractors
  9. Real estate agents

The 1099 employees are required by law to file their tax returns. Not only that, but also they should pay the relevant tax return. However, they are exempted from withholding income taxes or paying FICA taxes. What is more, the law exempts them from paying premiums to renew their Worker’s Compensation Insurance or the Unemployment Insurance either. It is for these reasons, and more, that more people are opting to hire and work with the 1099 employees rather than W-2 workers. 

Generally, people working as independent contractors are not employees. In this regard, the term “employee” in 1099 form might sound a bit inaccurate. Nobody has employed them. The clients for whom they work do not control the hours which the contractors spend working on any project. Clients do not control how the worker chooses to work. How the contractors provide their services or complete a project is entirely up to them and nobody else. Nevertheless, the phrase 1099 employee form is specifically for taxation purposes. 

The 1099 workers are responsible for paying income taxes. They are responsible for paying their own taxes. They do not have the luxury of working under an employer who takes care of these matters. Instead, they rely solely on whatever knowledge or information they possess. The clients they serve do not withhold state or federal taxes on behalf of the 1099 worker unlike they would with W-2 employees. The 1099 employees earning $600 or more in a year should ask for Form 1099-MISC and use it to report income tax if they haven’t received it yet. 

At times, some 1099 employees earn an income of more than $1,000 per year. They arrive at this amount after deducting expenses. Those who earn this amount are free to choose whether to pay it all at once or to spread the payment out over the year. For example, they can pay quarterly taxes. The option of making quarterly payments is to enable them to find it easier to settle whatever they owe to IRS. Otherwise, the payments could cause a few defaults, which would then attract hefty fines from the tax agency. 

Example of 1099 Form misc
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IRS Resources and Professional Assistance

The IRS has several resources you can use to help you fill the 1099 employee form. 

It is always a good idea to consider asking for professional help from experts who understand what taxation for 1099 employees entails. Taking such a step will help you in case you are wondering whether you owe the tax agency any taxes. Speaking with a tax expert will also help you to learn whether you ought to file any 1099-MISC form. The expert will also clarify more issues that might be troubling you and help to put your mind at ease once you know that everything is fine. 

The tax agency can send you the 1099 employee form when you ask for it. Do that by calling 1-800-TAX-FORM or 1-800-829-3676. Many office supply stores also stock and sell these forms. Visit one and place an order for the exact type of form you want. The problem with buying these forms at the stores is they are sold in batches of 25 or 50. The good news is the form you buy from these vendors are perfectly compatible with the scanners IRS uses. Avoid trying to send unsanctioned forms to IRS. Send only forms that the agency’s scanners can read. 

Before filling the 1099 employee form, check that you have your tax ID number nearby. 

The federal tax ID number could be your Employer Identification Number. 

It could also be your Social Security Number. 

Choose whatever is applicable based on the structure you established within your business. 

Fill the 1099 Employee Form

Next, you should now be ready to fill out the identification field set aside for a contract worker. This portion applies for people who employ the 1099 workers to work on a particular project for specific periods. The project owner should ask the 1099 workers to fill W-9 forms. The W-9 forms contain enough information to help the client. For example, some of the information it contains include the 1099 workers’ Social Security Number (SSN). Withhold the taxes of any 1099 contractor who does not provide SSN or fill out the W-9 form. 

The 1099 employee form should include the money the client paid the contractor. This piece of information should appear in Box 7. If you are struggling to find Box 7, you should simply look for the one marked “Non-Employee Compensation.” The client should then enter the amount of money in federal/state income taxes withheld from the contractor’s pay. Such details ought to appear in Box 4 or Box 11. Normally, clients do no withhold independent contractors’ taxes. However, this can happen under specific conditions. 

These conditions include: 

  1. Contractor’s failure to return W-9 form or to provide accurate Social Security Number
  2. Contractor is from a different country

In the first situation, the Internal Revenue Service recommends withholding 28 percent of the contractor’s pay as tax. Where the contractor is a foreigner from a different country, clients should withhold 30 percent of the 1099 worker’s pay. However, one needs to be a bit careful when dealing with a foreign worker. The United States has entered into a few treaties with some of the countries around the world. The treaties involve tax exemptions. Therefore, check if the contractor is from a country that is exempt from paying taxes

The 1099 employee form should also feature details of the client who hired the contractor. The contractor’s information should also appear on the form. The business that hired the contractor should only enter its phone number. Lastly, one needs to look for Box 12 and fill it with the appropriate information. The information required here is the name of the State where the client’s company or business operates. As per the IRS’ regulations, one should only enter the two-letter abbreviation in this box instead of the full name of the State in question. 

File Form with Agency 

With the form complete, you now need to consider sending it to the tax agency. Here, one of the options involves mailing the form to IRS. The other option would be to give the form to the 1099 employee or contractor. One needs to observe the deadline of January 31 when mailing to IRS or to send to the contractor though. Any client who fails to send or mail the 1099 employee form by January 31 stands the risk of attracting the wrath of the tax agency. That wrath could be in the form of some hefty penalties.

Clients have until February 28 each year to mail a copy of the 1099 employee form to the IRS. What the law requires them to send via mail is the actual Form 1099. It also expects clients to send Copy B of Form 1099 to the tax agency too. For clients who complete their taxes electronically, the deadline for sending the form to the Internal Revenue Service remains March 31. After sending the form, the clients have to keep their own copy too. Here, the law grants them the right to keep Copy C of the 1099 employee form. 

Clients should retain copies of the tax documents they prepared and sent for up to 4 years. 

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Back/Outstanding Taxes

What about back taxes? What can you do about them? 

Any person who fails to file or pay taxes commits a federal offense. The punishment for this offense is either imprisonment or hefty fines. It is prudent upon you to get up to speed with the payments as soon as possible. Gather every piece of information and paperwork you need for filing and paying any back taxes. Then, send the forms over to Internal Revenue Service once you complete filling them. File the tax returns even if you are not in a position to pay the taxes you owe right away. 

It is more beneficial to file delayed tax returns as soon as you can. Anybody who files the returns early has a high chance of enjoyed limited interests. Whoever files them late than the due date is likely to suffer higher interest charges. Penalties and fees for late payments will drop or rise depending on how fast or slow you were in filing and paying the back tax returns. You can still enjoy tax refunds even if you file late. However, you lose this privilege the moment the deadline of three years from the original return date elapses. 

Anybody who loses tax refunds will lose a substantial amount of money too. 

IRS holds tax refunds whenever they see that a taxpayer has not paid taxes past the due date. 

The self-employed folks, who are the most affected by the 1099 employee form, need all the credits they can get towards their Social Security Retirement. They need these credits too where disability benefits apply to them. However, failure to file and pay any outstanding taxes could jeopardize the likelihood of enjoying these benefits. IRS cannot allow you to enjoy these benefits. It needs details of your income to award you the necessary credits. Failure to report any income you earned will put you at risk of losing these credits. 

Any taxpayer who is yet to file or pay outstanding taxes should first determine the years that need filling. For this to happen, they need to prepare a list of the years they paid taxes. They will need various documents to do this. First, they will need copies of refunds, receipts of payments, and filings. With these documents, they will be in a better position of narrowing down the years for which taxes were neither filed nor paid. Even without these documents, they can still do the right thing by contacting IRS directly via its official website or phone. 

Old tax documents can also help greatly here. The documents needed include 1098s, 1099 employee forms, and W-2s. These documents are essential for any filing you need to do. Contact any company you previously worked for. Ask the company for information regarding your income or any tax detail relevant enough to help your cause. Ask your previous clients too for any record of your 1099 employee form they still have in their systems no matter how long ago you worked for them. 

Contact IRS

IRS has a phone number (1-866-681-4271) you can use to ask for information regarding any form that you cannot locate. Feel free to use Form 4506-T, which is also called Request for Transcript of Tax Return), to ask for information on your past tax documents the agency still has. Generally, the tax agency keeps exact copies of tax returns you filed for up to 6 years. You can ask for either an exact copy or a simple transcript. Exact copies of tax returns are different from transcripts. It is important to know what you need. 

Therefore, you now have all the information needed to fill the 1099 employee form. You can now fill it without any mistakes or errors. Keep it free of errors. You know what to do in case you failed to file or pay tax returns for any year. You know the different kinds of 1099 forms you should fill. You know the importance of asking for assistance from professional and experienced tax returns preparers. With this information, you are now in a better position to fill, file, and submit the form confidently today.