January usually bring with it a resurgence of energies and hope in the New Year. Businesses usually start to plan for expectations in the new year for growth, hiring, product launches, raising investment money and many other forward looking things. Before a company is able to properly move forward it needs to look back on the prior year and review what it has done. Taxes are very much the same – before we can really start with new tax year, there is a need to review all of last year’s payments to employees and contracts, and this comes in the form of W-2 tax reporting and 1099-Misc.
For companies that have employees working for them, in addition to paying them, a great way to make employees happy is usually to provide the W-2 forms for them as early in the month as possible. W-2 forms are required to be distributed to employees as well as eFiled to the IRS by January 31st. Providing the W-2 forms to both the employees and the IRS at the same time helps reduce possible tax fraud.
With the growth of the gig economy, we also need to consider freelancers, those who are self employed, or simply independent contractors. For the most part, the IRS requires that payments made to these individuals in amounts over $600 are reported to both the individuals and the IRS via the 1099-Misc, which is also due January 31st.
Timely filing with complete and accurate information is needed to avoid what could be very costly fines, penalties, and interest on the business.
Note: The year end of the company does NOT change the due dates of the tax forms. i.e. If a companies year end is March 31st the tax forms would still be due on Jan 31st and reporting information on a calendar year basis.
If anyone has any questions or concerns I am always happy and available to discuss.