It's time to ship out those W-2s and 1099s again.
This January ritual as inevitable: The mailing of W-2s and 1099s. While your employees may regard their arrival as almost a natural phenomenon, you know better. You the business owner has to be responsible for filling out those tallies of the previous years' wages and contract income and getting them into the hands of your workforce. And, that responsible party is you.
There is a reason you need to pay attention to this duty now: Deadlines are fast approaching. For any worker whom you paid more than $600 in 2011, you must do two things: (1) make sure the employee or contractor receives the proper form before the end of the month; and (2) make sure that you file this information with the IRS.
How to make the deadline
The due date is January 31. You meet the IRS requirement if you've properly addressed the appropriate form (W-2s and 1099-MISCs) and mailed it on or before that deadline.
The downside for failing to issue a correct Form W-2 or 1099 in time is serious business: The penalties range from $30 to $100 per document. That can add up fast, and it doesn't stop adding up until it reaches the small business penalty cap of $500,000. Worse: if the IRS determines that your failure to file is the result of intentional disregard of its requirements, the penalty is at least $250 per payee statement with no maximum. And if you are mad at someone and you willfully file a fraudulent claim that you made payments to a person when you didn’t, that person can also sue you for damages of $5,000 or more.
Why you can't file and forget
Remember that your obligation does not end once the forms are winging their way to your workers. You also have to get the data to the IRS. Generally, you have until February 29.t
Remember that you can’t designate any worker, including yourself, as an employee or contractor solely by issuing them a W-2 or 1099-MISC. The worker's classification is something that you have to get right – there are tough penalties for improperly treating employees as contractors. See our previous blogs and tax tips.
If you are scrambling right now to gather all this information and get it to your workers and the IRS, be sure to take some time to think about how to avoid the same last-minute rush next year. If you don't like worrying about getting all the proper paperwork to the IRS and spending all the time associated with the W-2 and 1099's. Let Granite Payroll Associates do that for the IRS. You should spend your Januarys keeping your customers happy. Do what you do best and let the professionals do what they do best.