Master Year End Tax Filing with Greenshades

As an employer, you must file year end forms:

• W-2 Forms: Employers must provide each employee with a Form W-2, Wage and Tax Statement, which outlines the employee's wages, taxes withheld, and other compensation information.  
• 1099-MISC Forms: If you have independent contractors who were paid $600 or more during the year, you may need to issue Form 1099-MISC to report their earnings.  

‍

Employers are also responsible for filing tax returns:

• 941 Form: Employers must file Form 941 to report income taxes, Social Security taxes, and Medicare taxes that are withheld from employees' paychecks. This form is filed quarterly but in special cases can be filed annually.

• 940 Form: Employers file this form to report and remit federal unemployment tax, ensuring that funds are available for unemployment compensation to workers who are laid off.
• State Unemployment Reports: Employers are required to file state unemployment tax reports, often referred to as SUTA (State Unemployment Tax Act) reports. These reports provide information about wages paid and the unemployment taxes owed to the state.
• ACA Reporting: Under the Affordable Care Act (ACA), applicable large employers must file Forms 1095-C and 1094-C to report information about health coverage offered to full-time employees.
• EEO-1 Report: Employers with 100 or more employees and federal contractors with 50 or more employees are required to file the EEO-1 report, which provides information about the gender, race, and ethnicity of their workforce.
• State and Local Filings: State and local filing requirements may pertain to income tax, unemployment insurance, disability insurance, and other obligations.

• Summary of Benefits and Coverage: If your company provides group health plans, you need to provide employees with a Summary of Benefits and Coverage (SBC) that outlines plan details and costs.

‍

Year end forms are generally due January 31^st.

W2 forms are issued to salaried employees, reflecting their annual wages and tax withholdings. In contrast, 1099 forms are provided to independent contractors, showing their earnings without tax deductions. Incorrectly classifying an individual as an employee or contractor can result in severe penalties and legal repercussions. Proper classification is paramount to prevent such complications.

There are a wide variety of 1099 forms that all serve unique purposes. Below is a list of the 1099 forms Greenshades accommodates, along with their respective applications:

‍

• 1099s: Independent contractors, freelancers, and self-employed individuals typically receive 1099-MISC forms from entities or individuals who have paid them a certain threshold of compensation for services during the year.
• 1099-NEC: Form 1099-NEC is required to be filed for every individual for whom federal income tax was withheld. This form is designed specifically for reporting non-employee compensation (NEC). Businesses are obligated to complete a 1099-NEC if they have provided payments exceeding $600 to an independent contractor or freelancer.

• 1099-MISC: This form is typically issued to individuals or workers who receive specific types of payments. For instance:
• Independent contractors or other workers who earn more than $600 for their services.
• Individuals receiving over $10 in royalties.
• Those awarded prizes worth $600 or more.
• Payments related to lawsuit settlements, except for those concerning physical injuries or medical expenses, also necessitate a 1099-MISC.
• ‍
• 1099-B: File this form if selling, receiving, or exchanging qualified investments or services, such as stocks or commodities, through brokers or barter exchanges.
• 1099-C: Form 1099-C should be filed for every debtor for whom you have forgiven or canceled a debt of $600 or greater that they owe to you, provided that you are classified as an applicable financial entity. Or in the event that can be clearly identified as triggering the debt cancellation has taken place.
• 1099-DIV: Form 1099-DIV serves the role of enabling banks and other financial institutions to report dividends and various distributions to both taxpayers and the IRS.
• 1099-INT: If you accumulate $10 or more in interest income, you can expect to receive a Form 1099-INT. This form provides a breakdown of the interest amount you earned, any applicable tax withholdings, and highlights whether any portion of the interest is tax exempt.

• 1099-K: Form 1099-K documents the annual revenue you received through payment methods such as credit, debit, or gift cards. It also covers payments from apps or online marketplaces where transactions occur. If the total amount received through these channels exceeds $600 in a year, the payment processors are obligated to provide both you and the IRS with Form 1099-K. Notably, this form does not cover gifts or reimbursements for personal expenses from friends and family.
• 1099-PATR: Cooperatives and specific other organizations file the 1099-PATR form when they pay patronage dividends or distribute property during the year.
• 1099-R: The 1099-R form is filed by anyone who has distributed $10 or more from retirement accounts, pensions, annuities, or similar plans to another person during the year.
• 1099-S: Those engaged in real estate transactions as sellers are required to file Form 1099-S at year-end.
• Top of Form

‍

Whether one should opt for W-2 employment or work as a 1099 contractor is influenced by individual needs and circumstances.

As a W-2 employee, benefits such as health insurance, paid time off, and potentially retirement plans are commonly provided. Employers automatically withhold taxes, simplifying the tax-filing process. While W-2 employment might offer more job stability, there might be limitations in terms of work flexibility, potential earnings, and tax deductions.

In contrast, a 1099 contractor often enjoys greater flexibility in work schedules and potential earnings. They can also claim specific business-related expenses as deductions. However, they're tasked with managing their tax obligations independently.

Factors such as job security, benefits, autonomy, and financial obligations should be weighed when determining the ideal employment arrangement.

‍

Tax obligations differ for W-2 employees and 1099 contractors, especially when considering employment taxes. W-2 employees have 15.3% of their earnings allocated for Social Security and Medicare taxes. However, employers cover half of this amount (7.65%) and deduct the remaining half directly from their paychecks. In contrast, 1099 contractors are responsible for the full 15.3% on their own, funding it from their earnings.