As businesses get ready to face their February 1, 2021 deadlines, it is time to review IRS requirements and make a plan. As a small business, the best way to stay tax compliant is to be informed and choose the best filing method.
Form W-2 Explained
Everyone who has spent some time in the workforce knows a thing or two about Form W-2. From the employer’s side, Form W-2 is a report on employee wages and the taxes withheld from employee paychecks.
Employers file these forms with the Social Security Administration (SSA) and provide their employees with a copy. Employees use their copy for income taxes. Even if your business only has one employee on the payroll, you will need to file Form W-2 for the 2020 tax year.
When are W-2’s due?
The Form W-2 deadline is usually January 31. When that date falls on a weekend, the IRS pushes it back. This year, employers have until February 1, 2021 to file Form W-2 for the 2020 tax year. Businesses also need to send their employees a copy by the February 1, 2021 deadline.
Form 1099-MISC Explained
As the form name suggests, Form 1099-MISC is used for reporting miscellaneous payments. The IRS recently updated this form so it can no longer be used to report nonemployee compensation. For payments to nonemployees, employers can file Form 1099-NEC, but we will get to that next.
Even though reporting nonemployee compensation is no longer an option on Form 1099-MISC, there are still a lot of payments your business needs to report for the 2020 tax year. IRS Form 1099-MISC provides a report on:
- Royalties or broker payments in lieu of dividends exceeding $10
- Awards or prizes
- Medical and healthcare payments
- Fishing boat proceeds
- Payments made to attorneys
- Crop insurance proceeds
If any of those payments ring a bell, it is time to file Form 1099-MISC for the 2020 tax year.
When is Form 1099-MISC Due?
Form 1099-MISC has a few different due dates, depending on your filing method. If you paper file Form 1099-MISC, your deadline is March 1, 2021. If you e-file, you have until March 31, 2021. For both options, all recipient copies are due by February 1, 2021.
Form 1099-NEC Explained
If your business made renovations, hired out a job, or had some other service performed, you may need to file Form 1099-NEC. Form 1099-NEC is a requirement for employers who paid an independent contractor or nonemployee more than $600 during the 2020 tax year.
On top of filing Form 1099-NEC, employers need to send a copy of their return to their recipient before the IRS deadline. The nonemployees or independent contractors that you paid $600 or more are recipients.
When is Form 1099-NEC Due?
Form 1099-NEC is due February 1, 2021. To meet this deadline, file Form 1099-NEC with the IRS and provide nonemployees with copies by February 1.
Simplify Meeting Your IRS Deadlines
Now that you have a little more information about your IRS requirements and due dates, it is time to determine your filing method. The IRS recommends e-filing. E-filing is a great option for small businesses because it is fast, safe, and efficient.
E-filing lends itself to faster IRS processing, which means less wait time for your business. E-filing is also faster because it cuts out delays associated with postal mailings, such as mailing lag times and making a trip to the post office.
Tax Software Can Help Your Business
Now more than ever, smart employers are harnessing technology to get big results while running a small business. Working with an e-filer is a great option, allowing businesses to make their filing process fast, safe, and efficient. Small businesses can bring ease and expertise to their taxes while still doing it themselves.
When you’re selecting the best filing solution for your business, it is important to be discerning. Here are a few things to look out for. Pay attention to price, whether the tax solution offers support, and, most importantly, whether or not they are IRS-authorized. Some e-file providers charge higher prices without providing all the features that can truly make tax season simple.
Completing forms correctly, without mistakes and typos, is an important part of avoiding IRS penalties. If you choose an e-file provider who offers internal audits or error checks, you reduce the danger of last-minute mistakes.
Choosing an IRS-authorized e-file provider is an important part of avoiding scams. A stamp of approval from the IRS ensures that your forms will be submitted safely and in the correct format.
Meeting all your deadlines this tax season is the best way to stay healthy as a small business. Don’t forget to file Form W-2, 1099-NEC, and 1099-MISC by February 1, 2021.
Author – Gabrielle Girard | Marketing
Gabrielle Girard is a content writer for ExpressEfile, a SPAN Enterprises product offering easy, hands-on e-filing for the lowest price in the industry. Employers can visit ExpressEfile.com to meet their IRS and SSA requirements for the February 1, 2021 deadline and get all the support they need.
Image and article originally from smallbiztalks.com. Read the original article here.