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"Counting On" The Independent ContractorMonday 01/02/2012
DwayneDwayne Briscoe / Bookkeeping-Results, LLC
Owner / QuickBook Pro Advisor

888-692-2083 / 713-898-1648

www.bookkeeping-results.com
The Independent Contractor

Due to the lackluster economy over the past five years, more and more people have become or hired what is known as an Independent Contractor.  When a business owner hires someone as an independent contractor and not as an employee, means no payroll taxes are withheld, however it does come with a separate set of problems, especially when it comes to reporting the information on a 1099.

 

If you are working with a person who is determined to be an independent contractor, there are several factors that you need to be aware of.  If a person offers a service as well as goods, classified as an independent contractor, ONLY have their services reported on the 1099.  The goods portion of what the contractor provides is not to be reported on Form 1099   However, if you are unable to differentiate between the two, complete the 1099 showing total payments made to the contractor.

 

Each independent contractor must complete the W-9 form, and you must make sure that your vendor has checked the appropriate box to define what type of company they are, as well as completing the Taxpayer Identification Number (TIN) section.  This form is not submitted to the IRS but is held at the company’s location for record keeping purposes.  If a business owner fails to file a 1099 based upon a vendor’s sole proprietor status results in a penalty in the amount of $50.00.  If there is an incorrect TIN, a penalty in the amount of $50.00 may be assessed.  Company policy may state that a vendor is to furnish a completed W-9 form before payment may be completed.  Perform W-9 requests annually for potential changes in entity status, addresses, and tax identification numbers.

 

Of utmost importance though, is that failure to process a W-9 form and 1099 form, could result in a disallowment of deductions for the business owner.  The reason for this is because someone needs to be paying the tax liability for the income in order for the business owner to take the expense.  Failure can result in a increasing not your profitability but also your tax liability.

 

Independent contractors/vendors are required to receive a 1099 Misc form should they receive $600.00 or more of payments in a calendar year, not necessarily the company’s fiscal year.  Vendors processed for payments should complete a W-9 form before payment is made, but it is not mandatory.  If the vendor fails to submit a W-9 form with a valid TIN, backup withholding tax may be made in the amount of 28% by the customer.  TIN’s may be verified either through the Social Security Administration for free if they are using a social security number, or if they are using an EIN, through fee-service web sites.

 

The 1099 forms are required to either be received in person or mailed by January 31st of the following calendar year the payments were earned or the next banking day if the 31st falls on a Saturday or Sunday.  The 1096 form shows the entire amount filed on 1099 forms, are to be postmarked by no later than February 28th of the following calendar year the payments were earned or the next banking day if the 28th falls on a Saturday or Sunday.

 

 

 

About Our Show Advisor: Dwayne Briscoe is the founder and owner of Bookkeeping-Results, LLC.   Dwayne began his company in January 2007, based on the foundation to educate small business owners and bookkeepers who use QuickBooks®.  Working as a full-charge bookkeeper and trainer in a variety of industries for over 15+ years, he is a certified Pro Advisor with 5 certifications, including Enterprise Solutions and Point of Sale.  He is also an instructor at Brazosport College in Lake Jackson, where he teaches basic accounting, QuickBooks®, and basic payroll, along with hosting his own private classes.

 

Bookkeeping-Results, LLC has focused more on quality and not quantity for their clients, by paying attention to the details.  Through regular continuing education participation, as well as exploring additional ways of “thinking outside of the box” to help expand people’s knowledge of their own financial well being, it’s important to focus on not only saving the client money but also making the client money.

 

Special Promotional Offer! For every person who either calls in or e-mails Dwayne that they heard him on the Steven Kay radio show, they will receive a 10-point Year-End Checklist that is not available to the general public.  It covers everything from what to do about W2s that come back from employees who have moved, all the way through the new IRS 1099K credit card being sent out in January.  To make this offer even better, Dwayne will answer one question about QuickBooks for free.

 
Previously broadcast from:
SKL @ BlogTalkRadio.com 11/07/2011 - 01/03/2014
CBS Radio's Talk 650 10/12/2009 - 07/01/2011
CNN 650 Radio News 11/08/2006 - 10/08/2009
KSEV AM700 04/04/2005 - 10/30/2006

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