IRS Form W9,1099,W4 and 1040
The IRS is actively targeting enforcement measures on accounts payable operations. Penalties for non-compliance are indexed and increase each year. It is more important than ever that IRS Forms be prepared correctly, filed and furnished timely, and that filers perform due diligence procedures to avoid or mitigate penalties.
You’re a contractor, freelancer or consultant and plan on getting paid more than $600 by one particular client in a tax year. They’ll need you to send them a completed W-9 before they can send you a Form 1099-MISC form. You’ll need that to report your income to the IRS.
Banks sometimes also need a W-9 when you open a new account with them.
If someone forgives or cancels a debt you owe them, they’ll need to file Form 1099-C with the IRS. They’ll need you to send them a completed W-9 to complete the process.Penalties? Misuse of TINs or SSNs – If a business misuses or improperly discloses a TIN or SSN provided on a W9 this violates federal law and the company may be subject to civil and criminal penalties. Not Filing 1099s Timely or Filing Incorrect Information – Penalty rates vary based on the size of a business and the time when correct information is received. Fines range between $50 to $530 per 1099. The difference between tax avoidance and tax evasion is the thickness of a prison wall.
- Denis Healey FORM 1099 Starting in tax year 2020, Form 1099-NEC will be used to report non-employee compensation totaling more than $600 in a year paid to a non-employee for certain payments from the trade or business. Previously, business owners would file Form 1099-MISC with an amount in box 7 to report non-employee compensation.
For tax pros who have been around for a while, you might be familiar with Form 1099-NEC; it was used until 1982 when the IRS added box 7 to Form 1099-MISC and discontinued Form 1099-NEC to simplify filing. What is reported on Form 1099-NEC?
If the following three conditions are met, clients can report a payment as non-employee compensation:
It pays to mind the tax-filing deadlines, too. Late filing of mandatory 1099s could lead to penalties ranging from $50 to $280 per 1099, with a maximum of $1,130,500 a year for your small business. The amount of the penalty is based on when you file the correct information return, as follows:
The official title of Form W-4 is Employee’s Withholding Certificate. When you complete the W-4 correctly, it informs your employer of how much money to withhold from your paycheck for federal income taxes. Because of this, you need to fill out a new copy of the form anytime you start a new job. As noted earlier, you should also fill out a new W-4 if you get married or divorced, have a child, start a side hustle or paid too little or too much in taxes. The IRS actually recommends filling out a new W-4 each calendar year to ensure that you’re paying the right amount in taxes.KEY TAKEAWAYS
Employees fill out a W-4 form to let employers know how much tax to withhold from their paycheck based on filing status, dependents, anticipated tax credits and deductions, etc.
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