When you running a small business, it is important to know which form is used when the tax season come. The most common forms in business are Form W-2s and 1099s.
What is Form W-2?
Let’s start with a quick refresher: Form W-2 is the document that employers use to report each employee’s wages and earnings to the IRS as well as the employees.
How to file Form W-2?
Most businesses use accounting and payroll software, which will complete fillings of Form W-2 for employers, even automatically mailing the employee copies to them. You can file from e-file or paper and send it to IRS.
This is a Form W-2
Understanding payment categories for the Form 1099s
What is new for tax year 2020?
From 2020, the IRS has introduced the new Form 1099-NEC just for reporting independent contractor income. Because of this, you are no longer using Form 1099-MISC for reporting non-employee compensation. Let’s check out new arrangement and box numbers for reporting certain income.
What is Form 1099-NEC?
Form 1099- NEC is a new document specifically used to report the amounts for non-employee who worked for you during 2020 and earned more than $600. Non-employee who is not on payroll on a contract basis. If you do not have contractor’s information, ask them to fill out Form W-9 for the preparation of Form 1099-NEC.
New: If you filed Form 1099-MISC with only Box 7 in the past, you should more likely to choose Box 1 (Nonemployee compensation) on the Form 1099-NEC.
What is Form 1099-MISC?
Form 1099-MISC is to report payments made in course of a trade or business to non-employee.
Lean more about Form 1099-Misc Boxes
Ready to file your 1099s, see What is a 1099 and do I need to file one?
Deadline: January 31, 2021
What if missing the filing deadline?
If you missed the deadline of January 31, 2021, you will need to pay a penalty depending on how late the filing is.
- $50 if you file within 30 days
- $100 if you file more than 30 days late, but before August 1
- $260 if you file on or after August 1