What You Need to Know About the 1099 Tax form
Many new developments have been on the rise in the twenty-first century. The entry of freelance workers and independent contractors in the job industry is one of the most notable developments of this century. These are people who are not employed directly by a company but who work on their own on a contractual basis. They will work for the company once the company needs their services and agrees to the freelancer’s terms. Among the many freelancers and independent contractors are people like landscapers, online graphic designers, free contract workers among others. In almost every field, these freelance and independent contractors will be found.
Freelancers just like employees in companies make their earnings from the services they offer. Freelancers may have the opening to escape payment of taxes. The government in conjunction with companies seeking services of freelancers have therefore put in measures to curb freelancer’s tax evasion. The compulsory signing of the form 1099 by freelancers is the condition that ensures they do not evade tax payment. Information on how this form prevents freelancers form evading tax payment is provided here.
Most revenues of any government come from the collection of taxes. People in formal employment will have their share of tax remitted by their employment firms. A form called W-2 is signed by people in formal employment as an agreement between them and their employer that their taxes be paid directly to the government by the employer. For freelancers, the form 1099 gives information of their earning. You, therefore, should know the difference between the forms 1099 and the form W-2.
The form 1099 declares the amount of money paid to the freelancer by the company. The amount to be paid as tax to the government by the freelancer is calculated from the information in the form 1099. The information given by the form is not a way of paying taxes but a declaration of how much earnings you have made. The freelancer is then expected to pay the correct taxes in person. Having signed the form and then failing to pay the required taxes makes the freelancer penalized by the government.
The question then arises if it is every freelancer that is supposed to sign the form 1099. It is compulsory for every freelance worker to sign the form 1099 every time they are contracted by a company for their services. Tax will, however, be submitted by a freelancer who earns more than six hundred dollars despite the signing of the form. Formality and accountability is the reason why every freelancer including those making less than six hundred dollars should sign the form. For accountability purposes, therefore, it is good to sign the form as a freelancer even if it may seem a burden.