Small business Tax Tips - I Forgot to Send Out 1099's by January 31 - What Do I Do Now?

Wayne Indiana - Small business Tax Tips - I Forgot to Send Out 1099's by January 31 - What Do I Do Now?

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Are you a small enterprise owner who hires independent contractors? If so, you may be required by the Irs to send out a Form 1099-Misc to those people. This narrative will help you determine your compulsion to issue those 1099's.

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The basic rule works like this: Form 1099-Misc is used to narrative total each year payments made to self-employed people who made at least 0 while the old calendar year. This 1099 must be given or mailed to the undertaker of a package deal by January 31 of the following year.

Note: For calendar year 2008, since January 31, 2009 is a Saturday, the deadline has been extended to the next enterprise day (Monday, Feb. 2, 2009).

The key here is either or not the someone who worked for you is self-employed. Obviously, this excludes employees. If you have employees, you give them a Form W-2 by January 31 (or Feb. 2) to narrative their payment (wages, salaries, bonuses, and withholdings). And this also means you don't have to send out a 1099-Misc to corporations who in case,granted services to your business.

The purpose of the 1099-Misc is similar to that of the W-2, but the goal here is to narrative revenue made by non-employees, not employees. And this is why the each year total revenue of self-employed contractors is reported in Box 7 of the 1099, "Nonemployee compensation."

In other words, the Irs is expecting you to contribute a way to help them track the revenue of the self-employed. Does all revenue earned by sole proprietors get reported on 1099's? Of procedure not. Who knows how much is unreported. And self-employed people know that if they don't get a 1099, it's difficult and roughly impossible for the Irs to outline out how much revenue a particular self-employed someone made. And so many self-employed people take advantage of this situation and only narrative revenue if they get a 1099.

And so there are many self-employed people who make fullness of money but receive no 1099's, and narrative no income, even though the law says they are supposed to narrative the revenue either or not they receive a 1099.

But back to you, the enterprise that paid the money to the contractor. Do you indubitably want to be part of the underground economy? If you take a deduction for payments to independent contractors but don't issue the corresponding 1099's, and you get audited, you are asking for trouble. Don't go there. Do the right thing and issue the 1099's.

What if the January 31 (or February 2) deadline has already passed? Go ahead and issue the 1099's anyway. Give the undertaker of a package deal a call right away and tell him you are sending him a 1099 as soon as possible. Why not do the right thing?

For details on how to comply with the 1099 reporting rules, download the Form 1099 instructions from the Irs website or consult with your tax professional. You'll want to send Form 1099-Misc Copy B to the self-employed someone right away and Form 1099-Misc Copy A, along with Form 1096, to the Irs by March 2, 2009.

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