The tax code is ever-evolving, and in light of the COVID-era relief and tax breaks changing again in 2021, there’s never been a better time to get a jump on your tax preparations. Get Organized Paperwork, whether physical or digital, is a necessary pain for any business. Your dealings with employees, freelancers, independent contractors, consultants, investments, property and real estate taxes, Social Security, Medicare, and Economic Impact statements all have to be reported in separate and precise processes. Accurate records and organized record keeping is the best way to ensure your taxes are filed on time and without error. One of the easiest ways to stay organized is e-filing. E-file360 can help you stay organized this tax season by handling your filing needs. Here’s how it works. Get Educated The COVID-19 pandemic has changed many tax rules and program qualifications, and it’s never too early to implement practices and do some research on the tax programs that will help you make the most of your business’s situations. We at eFile360 have complied a few different blog articles that can help you by identifying tax breaks for the tax year 2021 including everything from charitable contribution opportunities to QBI, state, and local tax deductions. We also shared some tips and tools for minimizing your taxes here. While your tax records may be less extensive when it comes to hiring freelancers and independent workers, it’s even more important to make sure that you are well-educated in the tax matters that will apply to the worker’s relationship to your business. When they are as well-versed as you, you will both be more likely to swap correct records and share the applicable forms and reports that will help everyone file their taxes smoothly. Classify Workers Properly From the Start In this new gig economy, where growth has been driven up exponentially due to the coronavirus pandemic, it’s increasingly important to classify workers properly in …
Best Practices for Working with Independent Contractors
Just like hiring a new employee, there are tons of best practices when it comes to working with independent contractors. Here are some of our favorites. First Thing’s First: Paperwork You know the feeling when you are thinking about something you have to do, but you’re in bed or somewhere inconvenient, so you tell yourself, “I’ll remember, I don’t need to write it down"? We all know it’s not true, right? That’s the same feeling you should get when it comes to requesting paperwork from independent contractors. Always do it first, so you (and they) don’t forget! Before any work is started or agreements signed, you’ll want to give your independent contractor a Form W-9 and have them fill it out and return it. W-9s are for your records and they help you with filing your taxes later. Once you have that settled, you can start negotiations, contracts, or any other agreement you are looking to create. Establish Communication Expectations and Boundaries This one goes both ways. Because the nature of an independent contractor relationship can range from short-term or temporary to long-term and near-permanent, it’s important to set boundaries for when and how you are going to communicate with each other. This includes discussing which days and times work best for phone calls, emails, texts, etc., as well as which communication medium you would like for specific things like project updates, discussion of issues, or amendments to the original project. Do you want weekly updates? Daily? Would you like to set up meetings after each project phase is complete? The more you offer upfront, the easier it is to work through any issues that may arise later. Boundaries are also important. If your independent contractor doesn’t work weekends or is going on vacation during your time together, those things need to be respected. If you anticipate lots of “off the clock” questions, discuss with the contractor what medium or communication method will work best to catalog …
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FAQs About 1098s
There are lots of different 1098s and we wanted to help you better understand them, so we’ve put together this guide of eFile360 resources and FAQs to help you grow your understanding. 1098s: The Basics 1098s are used when you are preparing your federal income taxes, and they describe the financial transactions you or your business made during a calendar year that could affect the filing of your tax return. There are seven different types of 1098 forms: 1098, 1098-E, 1098-T, 1098-C, 1098-F, 1098-MA, and 1098-Q. The most commonly used include the 1098, 1098-T, and 1098-C. For a complete list of these forms and a description of what each form is for, you can read our eFile360 blog article on that topic. To find out which forms efile360 can help you with, check out our supported forms page! How Do I Fill Out Form 1098? When you are filling out and filing your 1098s, you want to be sure you or the tax preparer you have chosen to assist you follows the IRS instructions, which you can find here. Will I Get Two 1098 Forms if I Refinance? Generally, you should expect to receive a single 1098 form per property per year. However, if you have refinanced any of your properties within the current tax year, you will receive two 1098s to reflect the changes instituted before and after the refinance. Filing Form 1098 allows you to report and deduct mortgage insurance premiums from your taxes every year. What Are Some Reasons I Would or Wouldn’t Receive a 1098-T? The 1098-T is issued by colleges and other educational institutions and is used to report how much a student (or their parents) paid in qualified tuition and expenses during the tax year. If you pay interest on student loans, you should get a 1098-T unless any of the following are true: A course you took did not offer academic credit You are a nonresident alien Your school waived your tuition or expenses, or they were fully covered by scholarships Or an employer or government agency …
Do I Need to File 1099-NEC AND 1099-MISC?
We’ve talked a lot about the differences between Forms 1099-MISC and 1099-NEC. But are there instances where you’d need to file both? 1099-NEC and 1099-MISC The 2021 drafts for 1099-NEC and 1099-MISC have been out since late last year. The goal of reintroducing the 1099-NEC (last used in 1982) was to keep non-employee expenses separate from the 1099-MISC. As more and more businesses rely on independent contractors and freelancers, the 1099-NEC will become more widely used in the future. When to File Only 1099-NEC If you have payments totaling more than $600 to a non-employee, which includes any person or business hired as an independent contractor or freelancer, you’ll need to fill out the Form 1099-NEC. Here are a few other eFile360 blog resources that talk about how the 1099-NEC works: Filing 1099-NEC: Dos and Don’ts Examples of When to Use Form 1099-NEC When to File Only 1099-MISC Your business will need to file a 1099-MISC for every independent contractor you have paid more than $600 within the tax year for anything other than non-employee compensation. You’ll fill out the 1099-MISC after you request and receive that independent contractor’s W-9. Some main items reported on the 1099-MISC include: Rent Proceeds from a fishing boat Royalties Substitute payments made instead of paying interest or dividends Payments for medical and healthcare Crop insurance proceeds Gross proceeds paid to a lawyer Excess golden parachute payments For more resources to help with your 1099-MISC filing, check out these eFile360 blog articles: What You Need to Know about 1099-MISC Online Form Filing A Guide to Preparing 1099-MISC Forms When Do I Need to File Both? In some cases, you may be required to fill out both 1099-NEC and 1099-MISC. In these cases, you will have paid an independent contractor or freelancer more than $600 throughout the year either for services or parts and materials, while also paying: …
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