When and How to File Tax Form 1099 Online?

Are you wondering whether you are required to file tax form 1099 this year? No worries at all because there are a number of good sources that can help you in getting complete details of the filing procedure of form 1099. The information available on these sources can help you in determining whether it is relevant to the business that you operate.

What is Form 1099?

Form 1099 is generally called 1099 and the most commonly used form in this category is form 1099-MISC. this is basically a common tax form which the IRS uses or tracking miscellaneous income. The small business owners make the effective use of this form for tracking and reporting the payments that they make to the independent contractors.

What is Independent Contractors?

Independent contractors are individuals hired on contract basis for completing a particular assignment or project. The services of web developers, graphic designers, social media consultants and copywriters fall in the category of independent contractors.

Do You Have the Obligation of Filing Tax Form 1099 this Year?

As a business entity, it is your responsibility to issue form 1099 to every individual that you hire in the form of independent contractor and pay a compensation of $600. This payment can also be made in the form of awards, prizes, services, rents and other miscellaneous income payments within a specific tax year. The 1099 forms are generally issued to all unincorporated and individual businesses like limited liability companies, estates, limited partnerships and partnerships. These forms are only issued for the business payments made during a year. These are payments that a business makes in the course of its trade to an individual who does not work in the form of an actual employee. This also covers unincorporated businesses. Thus, if you are a businessman and if you have paid $600 or more to an independent contractorduring a particular tax year, you will have to make arrangements for form 1099-MISC. this will help you in telling the IRS about the amount you paid to the independent contractor. However, there are some exceptions to this particular rule.

1099s Do Not Need to be Filed for Corporations

One of the most general and the most important rules that need to be kept in mind while filing 1099s is that these forms do not need to be sent to corporations. In case a company or an individual that a business hires is identified as a corporation, the business does not need to take the tension of filing form 1099. Though it is very rare, independent contractors might sometimes operate in the form of incorporated businesses. In case, businesses work with incorporated independent contractors, they do not need to submit form 1099.

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Mistakes That Need to be Avoided When Filing Federal 1099 Form

It is form 1099 season again and there are tax payers looking for the correct steps on how to file form 1099? If you happen to be in business, then it is necessary for you to pay good attention to the issuance of these forms and failing to do so will have you facing penalties. This burden on businesses seems to grow every year. There are even cost basis required on some 1099 forms these days. However, the real award is receiving the federal 1099 form. Since the IRS receives a copy of this form, it serves as an important piece of information that needs to be handled carefully as it can cost big for an individual. There are a lot of people who do not like these forms but there are some important mistakes that need to be avoided when filing these forms.

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Do not Forget to Check Your Mail

There are a lot of people who take care about the W-2 forms because they are attached to their tax returns highlighting wages and the taxes withheld. However, people tend to be very careless about form 1099. This is something that needs to be avoided. Each 1099 form should be watched out for. This is because these forms are matched to the Social Security Number of an individual and an individual is guaranteed an audit if he or she fails to report these forms.

Do Not Forget About Address Changes

In spite of the fact that the issuer of the form possesses an individual’s old address, information gets delivered to the IRS depending on the Social Security Number of an individual. Therefore, it is important for people to make sure that their correct addresses have been provided so that they can receive a copy of these forms easily and conveniently. Address changes need to be updated directly with the payers along with putting a forward order with the US Post Office. It is important for you to see every form that the IRS sees.

Beware of Errors

Deadline for filing federal 1099 form is 31st January each year. The payer; however, has time till the end of February to send the copies of the form to the IRS. There are many payers who send the forms to the taxpayers and even to the IRS simultaneously. However, there are others who make use of a delay of 30 days. This delay actually means that the tax payer has got chances of correcting certain errors in the form. It is necessary for the tax payers to go through the forms immediately instead of just piling them up.

Do Not Lose the Forms

As soon as the form is received, it needs to be opened and checked. The forms need to be kept in a safe place because they might be required while doing tax returns. Some individual take the services of a tax preparer and in this case they need to provide copies of each form that they receive to the tax return preparers. This is how to file form 1099.

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Important Things to Know About IRS Form 1099 Prior to Filing Taxes

Taxpayers are not very fond of receiving IRS Form 1099. On the other hand businesses might also not like sending these forms out. In fact, it can rightly be said that there is not a single individual who likes Form 1099 with IRS being an exception. The IRS or Internal Revenue Service simply loves the 1099s because these forms make way for data matching against the tax returns. Some of the most important things that you should know in regard to Form 1099 prior to filing your taxes are as follows:

It is better to give the Form rather than Receiving it

Usually, businesses bear the responsibility of issuing the 1099s to payees receiving minimum $600 during a year. However, this is just a basic rule and there are several exceptions to this rule. This is the reason why individuals get form 1099 for almost every bank account that they might be maintaining. This goes even for the people who earn not more than $10 of interest income.

Many Varieties are Available

There are different varieties available in the category of IRS Form 1099. There is 1099-DIV for dividends, form 1099-INT for interest, form 1099-R for payouts from individual retirement accounts and pensions, form 1099-G for unemployment benefits and local and state tax refunds, form 1099-S for real estate transactions and form 1099-B for barter exchanges and broker transactions. In fact, it would be right to say that there is a dizzying assortment available. You might come across different categories. However, remember that Form 1099-MISC standing for Miscellaneous is quite prompt. It covers a huge territory and the largest number of questions are also included in this type of form 1099.

Timing is Important

It is important for businesses to send out the IRS Form 1099 to their employees by 31^st January against the previous calendar year. Nevertheless, if you do not receive form 1099, you must not assume that you do not have the responsibility of reporting your income. You must report your income even if you do not receive form 1099 by February or March. Companies should remain aware of the fact that they would have to pay penalties if they issue the 1099s late.

Beware of Changed Addresses

Change of address information will genuinely be reported to the IRS depending on the Social Security Number of an individual despite the fact that you receive form1099 or not. It is your duty to update your changed address with the payers directly. You also need to carry out the responsibility of placing a kind of forwarding order with US Post Office.

IRS also Receives Form 1099

You might be well aware of the fact that any form 1099 that you receive is also sent to the IRS. Deadline for mailing the forms to taxpayers is 31^st January. However, the tax payers have time till March to submit all the completed 1099s to the Internal Revenue Service.

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Willful Filing as Late For Income Tax Returns Even After Filing of Form 4868 and Beyond Attracts Penalty

Now we can see that how a failure of timely file of individual income tax returns on time even beyond the extended time of request through IRS form 4868 may result in a penalty called “Failure to Timely File Penalty” which come through section 27 of Code of Federal regulations (CFR) 24.274-Failure to timely pay tax or file a return.

By this CFR in force, the penalties for failure to pay tax at the time required, for willful refusal to pay the tax as per section 27 and for fraudulent nonpayment of tax are provided for in 26 U.S.C. 5661 and 6656. In addition to these penalties, there is a penalty for the delinquent filing of a tax return, imposed as an addition to the tax shown on the return, amounting to five percent for each month or fraction thereof of the minor crime or neglect of one’s duty, not exceeding 25 percent in the aggregate, unless it is shown that the neglect of one’s duty is due to reasonable cause and not to willful neglect.

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However in the case of individual or as common income tax filers, the fraudulent non-payment may not occur as presumed unless or otherwise those involved in spirits trade like wine, where-in this section 26 U.S.C. 5661 and 6656 as stated as whoever, with intent to defraud the United States, fails to pay any tax imposed upon wine or violates, or fails to comply with, any provision of subchapters of USA laws, or regulations issued pursuant thereto, or recovers or attempts to recover any spirits from wine, shall be fined not more than $5,000, or imprisoned not more than 5 years, or both, for each such offense, and all products and materials used in any such violation shall be forfeited to the United States.

This also includes other offenses as punishable and the law states-Any proprietor of premises subject to the provisions of subchapter of US law, or any employee or agent of such proprietor, or any other person, who otherwise than with intent to defraud the United States violates or fails to comply with any provision of subchapter or subpart of part I of subchapter A of US law, or regulations issued pursuant thereto, or who aids or abets in any such violation, shall be fined not more than $1,000, or imprisoned not more than 1 year, or both, for each such offense.

Here one should not get misconstrued about the subject as present in this blog but it is always about that whoever as an individual who need to submit the income tax returns to IRS within the prescribed time as April 15th of 2015 should be dutiful. Whatever tax as figured by such individuals if could not be paid can be deferred through request of IRS form 4868 and this may only extend time for payment and not time to pay tax as one have to pay truly to IRS.IRS will include interest payment along with figured tax dues. But when one tries to postpone the tax payments with interest even beyond the extension time of 6 months as given by IRS form 4868 then may violating the IRS law to call for undue penalty should be understood.

File your extension form 4868 in case for deferring tax payments upto six months through IRS certified tax partner http://www.Etax4868.com

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Fail to Pay Tax on Time Only Hail Penalty from IRS

In this section, the civil penalties like when one does not file the tax but having paid the taxes by due date will also attract a penalty. In case if a person substantially understate his or her tax, or file an irresponsible tax return like frivolous return, or failing to provide the SSN-Social Security Number will also suffer by the penalties of IRS. The civil fraud penalty will apply and payable by persons who provide dishonest or unlawful information. 

The failure-to-file penalty may be applied to persons when they do not file tax return by due date including and even after utilizing the credit period through extension forms, this penalty amount is calculated at 5% for each month or part of a month based on the delay or lapse period of tax return  however treated as late. The maximum penalty chargeable by IRS is not more than 25%.

When a person is found that the failure to file tax returns is due to his fraud or being unethical, the penalty will be charged as 15% for each month or part of a month based on the lapse period of tax return but however treated as late and the maximum penalty chargeable by IRS may be 75%.

When the tax return was delayed by more than 60 days even after the due date or including the extended due date as per extension forms, the IRS minimum penalty will be smaller of $100 or 100% of the unpaid tax. If the reasonable cause is justifiable to IRS that that the filing and paying delay of tax was due to genuine reasons and not because of will full neglect, then one is forgiven and do not have to pay the penalty.

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One has to pay the failure-to-pay penalty of 1/2 of 1% of one’s unpaid tax for each month, or part of a month, after the due date that the tax is not paid. This penalty does not apply during the extension period available by filing Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, if one has paid at least 90% of his/her actual tax liability before the original due date of your return through withholding on wages, estimated tax payments, or a payment sent in with IRS Form 4868. If a notice of intent to levy is issued, the rate will increase to 1% at the start of the first month beginning at least 10 days after the day that the notice is issued. 

If a notice and demand for immediate payment is issued, the rate will increase to 1% at the start of the first month beginning after the day that the notice and demand is issued. This penalty cannot be more than 25% of his/her unpaid tax. One will not have to pay the penalty if they can show that he/she had a good reason for not paying their tax on time. This failure-to-pay penalty is added to interest charges on late payments.

The Combined penalties are that if both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5% (or 15%) failure-to-file penalty is reduced by the failure-to-pay penalty. However, if  a person file his/her tax return as delayed for more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $100 or 100% of the unpaid tax.

IRS wants to be just and even so as to be reasonable to taxpayers despite their various shortcomings as shown in these chapters and so it is always better to avoid the penalties than overcoming it. Please visit IRS certified and authorized tax service partner http://www.Etax4868.com for queries relating form 4868.

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