End-of-year tax reporting can be stressful for businesses and employers, but there are tools that can help streamline reporting processes. Using systematic approaches for accurate and timely W-2 and 1099 reporting can help keep your business in compliance while also ensuring that your employees and independent contractors can stay in compliance at tax time.
Here's what you need to know.
Overview of W-2 and 1099 Forms
If you're an employer, it's important to understand employee vs. contractor tax forms, including the various deadlines that come with them and the consequences of failing to deliver accurate forms on time. Learn more about employee classification here.
W-2 Form Information
W-2 forms are the "wage and tax statements" that businesses produce to show how much income an employee earned over the course of the year and how much withholding tax was paid on those earnings. This information helps determine whether an employee gets a refund at tax time.
When Are W-2 Forms Due?
W-2 forms are due to recipients by January 31 of the tax year following the year the income was earned. This can mean sending the forms through the mail, but electronic delivery is also acceptable.
What Happens If W-2 Forms Are Late?
Starting in 2023, businesses will be fined for late submission of forms. A fine of $60 per return will be imposed if the forms are 30 days late or less. If the forms are submitted 31 days late through August 1, a fine of $120 per return will be imposed. After August 1, the fine will increase to $310 per return. Any business that intentionally does not file will be charged a fine of $630 per return.
What Happens If There's An Error On A W-2?
If there are any errors on your W-2 form, such as incorrect personal details or incorrect earnings, they can be corrected by filing a W-2c form. It is important to note that the corrected W-2 form must be provided to the recipient within ten (10) days of the request. This ensures that the recipient has ample time to review and file their taxes before the tax deadline.
1099 Information
Throughout the year, various types of non-employee-related income are recorded on 1099 forms. Freelance workers receive 1099-NEC forms.
When Are 1099 Forms Due?
Most 1099s are due to recipients by January 31 of the tax year following the year the income was earned, or the following business day (if January 31 falls on a weekend). Some types of 1099s (1099-B, 1099-S, and 1099-MISC) are due to recipients by February 15.
What Happens if 1099 Forms Are Late?
Like the W-2, the penalty for sending 1099 forms late depends on how late they are. In 2023, penalties start at $60 and go up to $310. Businesses that intentionally fail to send the 1099 form are subject to a minimum penalty of $630 per form or 10% of the completed form.
What Happens If There's An Error On A 1099?
If there's an error on a 1099, submit a corrected 1099 form to enable the independent contractor or individual an opportunity to file correct tax forms.
Guide for Gathering Necessary Information
These W-2 preparation tips and 1099 filing best practices can help ensure that your business is ready for tax time before deadlines arrive:
1. Ask employees and independent contractors to confirm their personal information.
This may include the employee's personal address, tax deductions, and social security number. If you offer multiple ways to deliver forms to employees, ask them to select the best option for them.
2. Audit payroll reports before the end of the year.
Auditing payroll reports early is an essential practice that helps businesses detect and correct errors before tax time. By reviewing payroll reports ahead of schedule, businesses gain ample time to identify and rectify issues in the payroll process, such as incorrect employee information or inaccurate pay rates. This not only ensures that employees are paid correctly but also helps businesses avoid costly penalties and fines that can result from incorrect tax filings.
By addressing any payroll issues before tax time, businesses can ensure a smooth and efficient process, allowing businesses to focus on other essential tasks.
3. Check state and federal regulations.
State and federal regulations can change periodically. Hopefully, your business has stayed on top of regulations to ensure that you're in compliance, but if you haven't yet, now is the time to find out what may have changed and what you can do to ensure that you're in compliance with new regulations. Note that deadlines and other filing information can change as well. Check up with the IRS and your state's revenue website for the latest information.
Benefits of Electronic Filing and Payroll Systems
Using electronic filing and payroll systems can help simplify the W-2 and 1099 preparation process. Electronic filing and payroll systems can help reduce errors and ensure compliance when sending year-end tax documents. These systems offer streamlined processes that reduce the tax reporting burden for businesses while freeing your staff to focus on what they do best.
Electronic filing and payroll systems are also faster and easier to use than many alternatives. If your business isn't yet using an electronic filing and payroll system, look into this for the next year to ensure that your business is staying up-to-date and in compliance with tax regulations.
Stay On Top and In Compliance With Workforce PayHub
Stay on top of your tax and reporting obligations this year. Contact Workforce PayHub to streamline your tax reporting process with our expert payroll services. Subscribe to our newsletter for more tax tips and updates on payroll processing throughout the year.
