Freelancing: Know about the 1099 Tax Form
The twenty-first century has seen a rise in a number of new developments. Among the key developments in the twenty-first century is the increase in freelance earners as well as independent contract workers. 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. Examples of freelance workers and independent contractors are; landscapers, online graphic designers, free contract workers among many more. In almost every field, these freelance and independent contractors will be found.
Just like any other employees in companies, freelancers earn from their services. Freelancers may have the opening to escape payment of taxes. 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. Information on how this form prevents freelancers form evading tax payment is provided here.
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. People in formal employment sign form W-2 as an agreement with their employers that the taxes of the employee are forwarded to the government directly and not through the employee. 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 freelancer’s earning in the contact with the company is declared in the form 1099. Through the information in the form, the government can go ahead and calculate the amount to be paid by the freelancer as tax. 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. Failure to pay taxes once you have signed this form may lead to penalties on the freelancer by the government.
The question then arises if it is every freelancer that is 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. If a freelancer earns less than six hundred dollars, however, they will not be required to pay the taxes. 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. 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.
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