As we enter the first full work week of 2014 many business owners are probably still trying to shake off the cobwebs and get back into tackling their daily tasks. As they gather their bearings on the tasks that need to be done one that needs to be given high priority is end of year taxes. If the business had employees and/or independent contractors work for them in the past year it is the business owner’s responsibility to report information regarding their previous year’s income.
To help make the task of reporting this information easier here are the important dates, documentation needed and instructions you’ll need to know to simplify their completion:
Documentation to Employees
Each employee that was on payroll as of December 31 of last year and earned $600 or more needs to have a W-2 provided to them by January 31st of this year. A W-2 form documents all wage and salary information for an employee. It includes all federal, state and other taxes withheld from an employee’s paycheck. It also includes information on qualified benefit plans, tip income and other miscellaneous wage deductions.
Documentation to Independent Contractors
A 1099-MISC form needs to be provided to any independent contractor that earned $600 or more for services rendered during the previous year. All 1099-MISC forms needed to be received by the independent contractors by January 31st of this year.
Documentation to the Social Security Administration (SSA)
A Form W-3 needs to be prepared and filed with the SSA with copies of all employee W-2s by February 28th. The Form W-3 is a summary return of all W-2 forms that were provided to all employees on payroll at the end of the previous year. This form can be submitted to the SSA either by mail or electronically.
Documentation to the Internal Revenue Service (IRS)
A Form 1096 needs to be prepared and filed with the IRS, along with copies of all 1099-MISC forms supplied to independent contractors, by February 28th. The Form 1096 is a summary of all 1099-MISC forms provided to independent contractors that provided service to the business during the previous year. If the business is submitting 250 or more forms they must be filed electronically. Most of all, when submitting Form 1096 it should be the red scannable form. If something other than this is received the business can be subjected to a $50 fine
If any of the above mentioned dates fall on a weekend or national holiday the documentation must be received by the next normal business day. Penalties can be incurred by a business if the provided documentation is incomplete, inaccurate or not received on time.
Although it may appear cumbersome to prepare and file all the required forms, using the above information should help ease the task of reporting employee and contractor tax information.
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