Understanding Form 1099
Many new developments have been on the rise in 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. Companies needing the services of these freelancers contract them to work for them upon agreeing to the set terms. Among the many freelancers and independent contractors are people like landscapers, online graphic designers, free contract workers among others. In almost every field, these freelance and independent contractors will be found.
Freelancers just like employees in companies make their earnings from the services they offer. Freelancers may have the opening to escape payment of taxes. To ensure the freelancers do not evade their tax obligations, the government works with the companies contracting freelancers to put in measures to avoid tax evasion. The signing of the form 1099 is the condition put in place to make sure that freelance workers do not evade payment of taxes. How the form 1099 prevents freelance workers form evading tax payment is what we focus on now. Check this link to know more!
Most revenues of any government come from the collection of taxes. For people in formal employment, the government gets their taxes through the employer and not the employee. Companies have their formal employees sign a form W-2 as an agreement that the company will pay the taxes of the employees to the government on their behalf. For freelancers, the form 1099 gives information of their earning. You, therefore, should know the difference between the forms 1099 and the form W-2.
The amount a company pays a freelancer is declared in the form 1099. Once this information is forwarded to the government, the amount of tax to pay is calculated. One thing to note from here is that the form is not a way of submitting tax but a declaration of your earning as a freelancer. Calculated taxes of the freelancer are paid by the freelancer himself to the government. Having signed the form and then failing to pay the required taxes makes the freelancer penalized by the government. Visit site to know more!
Is every freelancer supposed to sign the form 1099? It is compulsory for every freelance worker to sign the form 1099 every time they are contracted by a company for their services. Despite the fact that all freelancers sign this form, only those making more than six hundred dollars will be required to pay taxes. A freelancer earning less than six hundred dollars only needs to sign the form for formality and to account for the earnings made. The form though it may appear to be a burden, is a good way of ensuring that there is accountability on the part of the freelancers. To learn more about 1099 Form, go to https://en.wikipedia.org/wiki/Tax#Kinds_of_taxes.