Do I need to file 1099s? What about other employment tax reporting?
These are great questions to ask! Here at Bliss Your Money we aim to get you through employment tax reporting and all tax deadlines with ease.
If none of this applies to your business because you don’t have any employees, keep reading. You might be surprised! Tax regulations change from time to time, and the status of your service providers can change, too.
And even if you have no 1099s to file this year, it’s a good idea to get familiar with employment tax reporting. This will help you prepare to hire a virtual assistant or start scaling up your business!
The information provided here is general and educational in nature and should not be taken as advice. This post has a lot of information, so please read it slowly and take notes as necessary. When searching for additional information, make sure your information sources are highly credible and up to date.
For your ease in staying compliant, we recommend seeking professional advice — see more information about that below.
When do I file?
Here are the current employment tax due dates.
Getting organized for employment tax reporting
Have a process for collecting and saving information about your employees and independent contractors. Try to get them to fill out the forms as soon as they start working for you!
Once you get the information, it needs to go into your payroll database of record — that is, the one place you count on for long-term storage of accurate information about the people who work for you. Gusto and other HR/payroll systems can really ease the process of getting and saving this information, but if you’ve only worked with independent contractors you may not need a whole payroll system. In that case, QuickBooks Online can help out.
“As a business owner, when another person performs work for you, you must first correctly classify that person as an independent contractor or employee.
“If the person is an independent contractor, then refer to Forms and Associated Taxes for Independent Contractors for your tax responsibilities.
“If the person is classified as an employee, then you must have an Employer Identification Number (EIN). Your tax responsibilities include withholding, depositing, reporting and paying employment taxes. You must also give certain forms to your employees, they must give certain forms to you, and you must send certain forms to the IRS and SSA.”
When the filing deadline is a couple of months away, look at your list of people to review whether there might be any missing or outdated information to collect. Sometimes contractors don’t answer requests quickly, so reaching out early helps ensure you can file on time without having to scramble on the day of the tax deadline!
Am I required to file? I don’t have any W-2 employees.
There are many kinds of 1099, and it is possible that your business may need to file more than one kind.
The IRS says,
“If you made a payment during the calendar year as a small business or self-employed (individual), you are most likely required to file an information return to the IRS. Receipt of certain payments may also require you to file an information return to the IRS.”
That statement came from this very informative page covering different types of 1099s and different industries. It also clarifies that some businesses don’t need to file any payroll-related tax information. If you think that’s you, make sure to double-check this page to verify if that really is your situation!
But maybe your organization is structured as a partnership, corporation, or some other type of entity. No fear, we have the resources here:
(In some cases, you may need to scroll down to find the “Employment taxes” section.)
— Native American tribal governments and members
— Businesses taxed as C-corporations or S-corporations
— Taxpayers and businesses outside the United States
— Gig workers or and gig platform owners
Learning resources about federal taxes
What New Business Owners Need to Know About Federal Taxes
This IRS online learning website looks very useful! You can learn about small business taxes in video format with a transcript.
What is worker classification?
Worker classification means treating someone as either an employee or an independent contractor.
Understanding worker classification is important because you don’t want to accidentally deprive someone of the benefits of employment. It also helps with all of this tax compliance stuff.
Who do I classify as an employee?
Check to find out what forms an employee must complete and give to you (ideally, on their first day of working for you) and what form your business needs to send them at the end of the year.
Federal laws classify workers as employees for certain industries and types of workers. These are called statutory employees. There are statutory employees under state law, too.
Make sure that you get to know the federal, state, and local laws that are specific to the kind of business that your company does, as well as the common-law definition of an employee. The IRS explains as follows:
“Under common-law rules, anyone who performs services for you is your employee if you can control what will be done and how it will be done. This is so even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed.”
“Common law” means a legal principle that isn’t written down in any legislative act or executive regulation.
Who do I classify as an independent contractor?
Some people cannot be your employees because of the legal requirements for their profession. These are statutory nonemployees.
“People such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers, or auctioneers who are in an independent trade, business, or profession in […] The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.”
The page on Forms and Associated Taxes for Independent Contractors explains that if they’re an independent contractor you should have them send you a Form W-9 (ideally, when they start working for you). Use Form 1099-NEC to report to the federal government how much you paid the independent contractor.
To complete your 1099s filing, bundle them with a 1096 cover sheet for processing. Again, services like QuickBooks Online handle this automatically.
Employment tax reporting forms
Here’s the IRS forms & instructions page. The IRS also provides accessible documents for people with disabilities.
If you are filing 1099s yourself, keep in mind the IRS requires certified 1099 Forms that can be read by their scanner. We think the easiest way to do this is to use financial software to create the forms and file them with the IRS! You can download forms from the IRS, but they’re only for reference, because if you print them on your own printer they can’t scan them.
If you want to submit your forms in the mail, you can order scannable paper forms online from the IRS, or order them from certain office supply stores that provide authorized 1099s. Be sure to request 1069s as well.
Getting professional tax advice
If you’re unclear about employment tax reporting, if you don’t have time to read all of this, or if you suspect that your situation is different and unusual, seek advice about your tax obligations from a qualified tax advisor, such as a CPA or tax attorney.
Close to the year-end, when your bookkeeper, financial advisor, or tax attorney asks about whether you need to file 1099s, make sure you’re on the same page with them. They are probably trying to ask about the classification of your workers and the tax forms that need to be filed. Your tax advisor is less likely to be asking about your worker classification status, because she already knows if you’re self-employed or the owner of a corporation.
We help with 1099 filings & payroll setup
If all of this sounds scary, we can help! You don’t have to struggle alone.
We can assist in verifying that all employee and independent contractor information is accurate and that your financials are up-to-date. Bookkeepers can be a great resource around the 1099 process and our team is committed to making it a blissful experience for you. We’ll also set your business up for success by helping to ensure you are organized ahead of time for the next tax deadline.
Finally, we can get your information to your tax preparer, so our clients typically get lower tax preparation bills. Reach out to Team Bliss today!