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What You Need to Know About the 1099 Tax form
The rise of many new developments has been a characteristic of the twenty-first century. The entry of freelance workers and independent contractors in the job industry is one of the most notable developments of this century. These are people who are not employed directly by a company but who work on their own on a contractual basis. They will work for the company once the company needs their services and agrees to the freelancer’s terms. Landscapers, online graphic designers, free contract workers among others are some of the freelance workers and independent workers we have. These are becoming more and more common in almost every field.
Just like any other employees in companies, freelancers earn from their services. There is, however, a loophole of tax evasion by these freelancers. For this reason, the government and the companies contracting the freelancers put a condition to ensure that the freelancers do not evade tax payment. The compulsory signing of the form 1099 by freelancers is the condition that ensures they do not evade tax payment. Here, we focus at how this form ensures that the freelancers pay their taxes to the government.
Collection of taxes is one of the ways most governments raise their revenues. People in formal employment will have their share of tax remitted by their employment firms. A form called W-2 is signed by people in formal employment as an agreement between them and their employer that their taxes be paid directly to the government by the employer. For freelancers, the form 1099 gives information of their earning. Is there then, any difference between the forms 1099 and W-2?
The freelancer’s earning in the contact with the company is declared in the form 1099. Once this information is forwarded to the government, the amount of tax to pay is calculated. The information given by the form is not a way of paying taxes but a declaration of how much earnings you have made. Remittance of the taxes of the freelancer to the government is done in person. A freelancer who fails to pay his or her taxes is liable for penalties by the government.
The question then arises if it is every freelancer that is supposed to sign the form 1099. The truth is that every freelancer has to sign the form anytime they are contracted by a company. Tax will, however, be submitted by a freelancer who earns more than six hundred dollars despite the signing of the form. Having signed the form and you earn less than six hundred dollars, you are not to worry as the form is a formality and also for your accountability. Signing of the form shows that the freelancer is accountable although some people may regard it as an unnecessary burden.