Payroll Service is Ready for the Tax Season! Are You?
Generally, people don’t think about filing tax returns until April starts pressing closer. But if you are a small business owner, you know that feeling starts to weigh heavy on your shoulders right around January 1 and it doesn’t let up, really, until you get your personal taxes done in April.
Payroll reporting requirements start early, don’t they? But before those forms are issued, small business owners must obtain the correct Taxpayer Identification Number (TIN) and they do that through the form W-9.
Why Issue a Form 1099?
Generally for small business owners, IRS form 1099s are issued to vendors including individuals or companies for amounts paid to them in excess of $600. The person issuing the 1099 sends a copy to both the payee and to the government. They are due to the recipients by January 31 every year. Why would you receive a 1099? There are lots of reasons someone would be required to report:
Income paid- Real estate transactions
- Mortgage interest paid
- Acquisition or abandonment of secured property
- Cancellation of debt
- Contributions made to an IRA
What is a W-9?
The W-9 form asks for the recipient’s name, address, tax identification number, and confirmation that the taxpayer is not subject to back-up withholding and that the taxpayer is a U.S. citizen.
For individuals, the TIN is often their social security number. Some individuals who become U.S. resident aliens for tax purposes are not eligible to obtain a social security number. These individuals must apply for IRS Individual Taxpayer Identification Number (ITIN), unless they have an application pending for a social security number.
Payors are required to obtain this information and are best advised to keep it on file. There is no rule in the tax code requiring a new W-9 be completed annually, but many small businesses make it a routine policy to request a new form before 1099s are issued. It is the responsibility of the recipient to notify the reporter of any changes to the W-9, but that does not always happen – and it is the payor’s responsibility.
The simple fact is that the small business owner needs the form, it is free from the IRS, it takes only a few moments, is easy to complete and it confirms the information already on file makes an annual update reasonable.
A payroll service like The Payroll Department can help you get on track and stay on track with getting the forms you need and issuing the 1099s by the deadline. They aren’t just a payroll provider, they are the experts to keep you in compliance when it comes to all payroll matters – and dealing with taxes and the IRS can be frightful.
We know you want to be spending your time providing leadership, improving your workplace and building a successful small business. So turn the payroll over to the experts at The Payroll Department. Whether you are dealing with employees or contractors, they can help you manage the entire process.
-Elaine of The Payroll Department Blog Team
