Government Forms

From Wikipedia, the free encyclopedia:

1099 refers to a United States tax form used for, among other purposes, reporting payments made to independent contractors. The ubiquity of the form has also lead to slang use of the phrase '1099' to refer to the contractors themselves.

1099s and Taxes:

This is a government form used to track payments made to people and companies. 1099's are normally for paying Vendors, but can also be used for paying Employee's. When a person is paid on the form, 1099-misc, all money earned by the individual is paid on an untaxed basis. It is then the responsibility of the individual to file and pay the appropriate taxes. These taxes can be owed to Federal, State and Local governments. Workers compensation and unemployment issues also must be addressed independently. The form is submitted at the end of the calendar year.

W-2s and Taxes:

This is a government form used to track payments made to Employee's. When a person is paid on the form W-2, the employer automatically withholds and pays all of the necessary employee income taxes as required by the IRS. These taxes include: Federal Income Tax, State Income Tax, and FICA (Social Security and Medicare). In addition, the employer will pay all of the necessary employer taxes. These taxes include: FICA (Social Security and Medicare), FUTA (Federal Unemployment Tax), and SUI (State Unemployment Tax). The form is submitted at the end of the calendar year.

The IRS and Taxes:

In recent years, the IRS has begun to realize the large sums of potential tax revenue they are losing due to misclassified 1099 independent contractors who should legally be W-2 employees. When a company pays a contractor on a 1099-misc form, they avoid the following: federal and state tax withholdings, deposits and reports, the employer’s share of Social Security and Medicare taxes, state and federal unemployment insurance premiums, state disability insurance premiums, Workers’ Compensation costs, fringe benefits, vicarious liability for employee negligence, and EEOC regulations. The IRS estimates that it loses between $4 to $20 billion per year in unpaid taxes as a result of this misclassification problem. Understandably, the IRS has made it a priority to investigate 1099-misc forms that are turned in at the end of the tax year.

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