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Contractors and 1099s: the importance of timely filing

In the sometimes-hermetic world of tax law, there are certain number combinations that have come to take on very specific connotations.

The number 1040, for example, is closely associated with individual income tax returns. Other numbers, too, carry clear connotations. And one of those is certainly 1099.

A 1099 form, of course, is the equivalent for contractors to what W-2 forms are for employees. In this post, we will discuss filing deadlines for employers for 1099-MISC forms, which are coming up soon.

When making these filings, it is important for employers to keep in mind that filing with the IRS does not necessarily take care of the matter. This is because many states have their own requirements for reporting payments made to contractors.

Such requirements cannot be ignored. If a filing deadline is not met, it could result in tax penalties.

California is one of the states that have a filing requirement and state-specific deadline for 1099-MISC forms. The deadline is March 31.

Failure to meet this deadline does not only put employers at risk of tax penalties. Failure to send timely 1099s to contractors can potentially lead to conflict with the IRS regarding worker classfication for payroll tax purposes.

To be sure, distinguishing contractors from employees is not an easy task. As we explained last year in our November 20 post, no one single factor is determinative.

But employers would do well to keep their ducks in a row when it comes to timely sending of 1099s to workers they have deemed to be contractors. Employers have enough to do running their businesses without getting into tax disputes about payroll taxes with the IRs or state revenue agencies.

Source: Forbes, "1099-MISC Forms: Don't Forget State Filings," Tom Taulli, Jan. 22, 2014

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