November and December seem to fly by every year! Between Thanksgiving, Christmas, and New Years’ Eve weeks seem to just disappear as you try to manage family time, holiday events and for any, a fair amount of traveling. After all of that when you get back to the office you are already staring tax season in the face! Your friends at Deitz Consulting are here to come to your aid this year by giving you a roadmap to a successful and stress-free tax season! Each month we will put out a new article and video to let you know what you need to be working on that month to make sure you are staying ahead of the game.
January: W2’s and 1099’s
As the new year kicks off the first deadline that business owners face coming into tax season is the deadline for W2’s and 1099’s. These have to be in the hands of the respective employees, contractors, and vendors no later than January 31. Making sure all of these documents are accurate and delivered in time is the first step in setting yourself and your company up for a stress-free tax season.
Most of us have received a W2 at some point in our adult lives and many of us are still getting them. W2’s are for any employee of a company or anybody performing work for that company who has taxes withheld. Since payroll takes place regularly, most employers won’t have any problems with these forms as long as they were keeping everything organized throughout the previous year. Accurate bookkeeping makes tax season much easier and W2’s are just the first example of that. As a Deitz Consulting customer, you wouldn’t have a thing to worry about since we will have everything completely organized and ready for this first important tax deadline. Most of our services packages include us completely taking care of all W2’s and having them out well ahead of the January 31 deadline!
Another important form that has to be delivered in January is 1099’s. This form is for vendors or contractors who you paid over $600 in the previous year. 1099’s are for those who are not having taxes removed from their payments. Much like a W2, these are pretty simple to put together as long as regular bookkeeping tasks have been taking place and all information is well organized. Having all financial records accurate and up-to-date makes it a piece of cake to determine who all needs a 1099 and make sure that the information on it will be correct. One common misconception about 1099’s is that they are not needed for an LLC. The truth is a little more complicated because it comes down to how the LLC was originally set up. If the LLC is a single-member or sole proprietor, then a 1099 is still necessary. Avoid a common mistake and look closely at your contractors and vendors who are LLCs before determining they don’t need a 1099. As with W2’s, Deitz Consulting customers have nothing to worry about when it comes to 1099’s because our team will have everything organized and ready! All of your 1099’s will be delivered well in advance of the IRS deadline.
You may have also seen many posts on social media about “the government wants to know when anyone receives a Paypal or Venmo starting in 2022…” This is true, starting in 2022, more online payment platforms fall under the federal policies of reporting all payments that flow through their system when they are tagged as ‘for business’. You however should already be reporting an income you receive regardless of the exact method of payment.
Not meeting the deadlines for each of these forms can be very costly! The penalties put in place were designed to make it financially infeasible to put these off and they are fairly effective. When it comes to the W2’s, the late fees start at $50 per form. One month later it goes up to $110 per form, and if the IRS determines that you are actively avoiding providing them you could pay as much as $560 per W2 not delivered! 1099’s aren’t quite as expensive, but can still be quite costly. These also start at $50 per form but they cap at $270 per form not delivered. While not as expensive it still adds up and is a reliable deterrent!
Simplify and relax!
Staying on top of your payroll and expenses all year will make your tax season a breeze! Taking that information and getting your W2’s and 1099’s out by January 31 is the first step in a stress-free tax season. By letting Deitz Consulting assist with your books you will not only be well organized when tax season comes around, but you can sit back and relax knowing that we will be well ahead of all IRS deadlines. Our customers let us do what we do best so that they can rest easy and focus on growing their business all year!