Small Business Tax Alert: Submit W-2s and 1099s by the Due Date

Small company employers must meet yearly reporting and filing dates and provide documents to both employees and the IRS. Further information may be found here.

What you’ll discover:

What tax documents do I need to deliver to my workers and contractors?
When is the last day to file W-2s and 1099s?
What if I fail to submit the W-2s and 1099s on time?
Where can I obtain assistance with tax filing, reporting, and employee classification?

Small company owners who pay workers or independent contractors should be aware of the yearly IRS reporting and filing deadlines, which fall early in the calendar year. In addition to standard tax filings, businesses must provide various tax forms to employees and the IRS. Knowing and preparing for these needs now may assist ensure that your company keeps on track and fulfills its commitments, and that your workers have everything they need to complete their individual tax duties.

What tax documents do I need to deliver to my workers and contractors?

The particular paperwork you must create and mail are determined on how your employees are categorised. Whether you have hourly or salaried workers for whom you withhold and remit payroll taxes, you will require IRS form W-2. If, on the other hand, the employees are independent contractors whose payments are exempt from payroll taxes, you will utilize IRS form 1099-NEC. Several small company owners use both employees and contractors and must be aware of both filing requirements.
Forms W-2 for Workers

A W-2 form details an employee’s pay for the preceding tax year (January 1 – December 31). The following information is included on the form:

Complete remuneration.
Wages from Social Security.
Wages under Medicare.
Tips.
Amounts withdrawn throughout the year for federal, Social Security, Medicare, and state and municipal taxes.

The form also contains information on contributions to employer-sponsored retirement plans, pension plans, and employer-sponsored health insurance, as well as some other less-common benefits such as relocation cost reimbursements and qualifying adoption fees. You must submit a W-2 form if you had an employee who received any amount of salary during the tax year.
1099-NEC Non-Employees Forms

The “1099” category contains multiple IRS tax reporting forms. The 1099-NEC (Non-Employee Compensation) form is used to record pay received to non-employee personnel during the preceding tax year. If you paid at least $600 to a person or company for services given to your business throughout the year, you must produce a 1099-NEC form.

Employers formerly used form 1099-MISC to disclose such remuneration; starting with tax year 2020, companies must use form 1099-NEC. Form 1099-MISC is still used for reporting prizes and awards, but it is no longer utilized to record remuneration given to independent contractors for services completed.

When is the last day to file W-2s and 1099s?

You must furnish workers with their W-2 forms and submit them with the IRS no later than January 31, 2023, whether filing by paper or electronically.

Similarly, if you paid independent contractors in 2022, you must provide the payee and the IRS Form 1099-NEC by January 31, 2023. If you need to send a 1099-MISC to someone in order to record other income payments, prizes, or awards, you must provide the payee a copy of the form before January 31, 2023. But, you will have until February 28, 2023 if you file on paper, or March 31, 2023 if you file online, to submit it with the IRS.

What if I fail to submit the W-2s and 1099s on time?

Failure to deliver workers and contractors with W-2s or 1099 papers on time may be an expensive error. In fact, if you are 1-30 days late, you may face IRS fines of $50 per form, with a maximum punishment of $206,000 for small enterprises. For forms submitted between 31 days late and August 1, 2023, the fee will be $110 per form, with a maximum punishment of $588,500. If forms are submitted after August 1, the penalty increases to $290 per form, with a maximum punishment of $1,177,500 for small enterprises. If you knowingly fail to file the forms, the penalty is $580 per form, with no limit on the total amount of the penalty.

Small companies that submit W-2 or 1099 forms with erroneous or illegible information may face IRS fines, therefore it is critical to prepare these forms properly.

Where can I obtain assistance with tax filing, reporting, and employee classification?

To keep progressing toward their objectives, small company entrepreneurs must balance many duties and remain on top of conflicting demands. Naturally, W-2 and 1099 reporting may not be at the top of everyone’s priority list. Nevertheless, with the hectic Christmas season behind us, it’s easy to overlook these essential tax filing dates. But, in order to avoid tax fines and IRS attention, every small company owner who pays workers or independent contractors must comply with these crucial standards.