Handling your Contractors like a pro
Our Resource Center is another place where QuickBooks has your back! Ken Boyd wrote a helpful article on 1099 forms that is sure to add some clarity to your tax work flow.
Many business owners utilize contractors to work, but let’s make sure we know the difference between a contractor and an employee. This is the first step in having a successful filing period with your 1099s. Boyd breaks it down into three main questions to help you determine where your worker stands:
Behavioral control: Does your company have a right to control what the worker does and how they perform the job?
Financial control: Does your company have a say in the material aspects of a worker’s job? In other words, do you decide which expenses are reimbursed or who provides necessary tools and supplies?
Contractual relationship: Is there a written contract? Are benefits such as pension, insurance, or vacation days a part of that contractual obligation?
These questions should help steer you in the right direction. You can also check out this IRS page to give you any additional help.
Now let’s take a look at some helpful tips for the 1099-NEC form:
A company must provide a 1099-NEC to each contractor that is paid $600 or more in one calendar year. Independent contractors must include all payments on a tax return, including payments that total less than $600. Keep in mind that nonemployee compensation includes payments to individuals and partnerships.A number of payments do not require a 1099-NEC, including:
- Payments to a corporation, including a limited liability company that is treated as a C corporation or an S corporation for tax purposes
- Business travel allowances paid to employees
- Payments for merchandise, freight, or storage
Still have questions? There’s way more information on understanding this form in this article: Handle your 1099 forms for contractors like a pro. You got this, Community!