End of Year Concerns
December is your best last chance to obtain incomplete information for the 2009 tax reporting deadline coming due on January 31, 2010 (yes, I know it falls on a Sunday but work with me here). Both contractors and employees should receive their tax forms (1099 or W-2) by end of month January. I am not intending to speak on constructive receipt so just plan to get it to them without extra worry.
Here is a fairly common scenario for me. A small contracting business uses some workers (who are not employees) periodically and pays them hopefully with a business check. The worker promises to fill out a W-9 which will contain address information and their tax identification number. Now it's January of the following year and you can't find them and they never filled out the form or it was submitted incomplete. Bad news for you as the IRS expects you to generate 1099 forms on each person (for contract labor) paid more than $600 in the calendar year. If you don't generate a 1099 with complete information then you are out of compliance and may lose the deduction or face a failure to file penalty. There are some exceptions to the reporting requirement but you may wish to call me to discuss in more detail.
The same scenario falls true for employees but they are required to fill out W-4's when they are becoming your employees. All those employees must receive a W-2 within a certain time period. Yes, even those that made under $100.00.
What I am trying to convey is to get the information before they begin work for you. Don't lose deductions and face penalties and grief. Now is the time to get the missing information in order to prepare for your reporting requirements. Trust me, I have heard more horror stories of people who can no longer be found due to moving, disconnected numbers or avoidance of contact. Those recipients will know why you are calling them and a number of them would prefer to not declare that money. Do it right and simplify your life.
Visit other areas of my website (www.richardjgarciacpa.com). To learn more about tax due dates, select the tax center tab. You will find helpful due date information available under the selection marked tax due dates.
Richard J. Garcia | 12/07/2009