As many small business owners are realizing that the new year is finally upon us, they’re realizing that those dreaded tax forms for their employees and independent contractors need to get filed and postmarked by January 31st to these people paid by them with no exceptions or face potential fines and penalties. Today’s we’re going to look at the W2 form and the 1099 form.
If you have employees, i.e. withholding and paying taxes on their behalf, make sure that you use the 2012 W2 form, which are available at most any office supply store or online. You can request free forms from the IRS web site, however it’s likely going to be too late to get in time to have them filed by the 31st. You also do not have the option of downloading a copy of the form from their web site because it’s stated implicitly on there and could cause problems with processing.
Another option for processing your W2 forms, you can log into the Social Security Administration web site for employers to setup a User ID and Password. This page also allows you to verify social security numbers before processing your W2 forms, to prevent potential errors later. A key point that is different than in years past, is that if you as an employer made medical insurance payments on your employee’s behalf, this total amount for 2012 must appear in Box 12 with a DD code. It was originally enacted for the 2011 W2 form, but the IRS postponed it until 2012.
The 1099 Misc Form should be accompanied by a completed W-9 Form before processing by every vendor that you have paid in 2012 with a check or cash. If you paid vendors with a credit card, that will be explained in an upcoming segment as to why it’s not necessary to report their payment information on a Form 1099 Misc.
The reason for the 1099 payment information reported to the IRS, is to ensure proper taxable income reporting for each person you paid, so you can legitimately claim that tax deduction on your tax return. Although you are required to only submit 1099 Misc Forms for those individuals who check individual/sole proprietor on the W-9 Form, you would not be penalized for sending a 1099 Misc Form to all of your vendors. If you have failed to collect these throughout 2012, or if the vendor fails to submit a W-9 form with a valid Taxpayer Identification Number (TIN), backup withholding tax may be made in the amount of 28% by the customer. TIN’s may be verified either through the Social Security Administration for free if they are using a social security number, or if they are using an EIN, through fee-service web sites.
About Our Show Advisor: Dwayne Briscoe is the founder and owner of Bookkeeping-Results, LLC. Dwayne began his company in January 2007, based on the foundation to educate small business owners and bookkeepers who use QuickBooks®. Working as a full-charge bookkeeper and trainer in a variety of industries for over 15+ years, he is a certified Pro Advisor with 5 certifications, including Enterprise Solutions and Point of Sale. He is also an instructor at Brazosport College in Lake Jackson, where he teaches basic accounting, QuickBooks®, and basic payroll, along with hosting his own private classes.
Bookkeeping-Results, LLC has focused more on quality and not quantity for their clients, by paying attention to the details. Through regular continuing education participation, as well as exploring additional ways of “thinking outside of the box” to help expand people’s knowledge of their own financial well being, it’s important to focus on not only saving the client money but also making the client money.