The world of independent contracting sets itself apart from the rest of the taxable professions. You receive specific tax forms to fill out for being an independent contractor as opposed to being an employee. More than likely, you will come across tax forms like the W-9 or the 1099-NEC. You are required to fill these out accurately, and on time come every tax season.
To have the information required to properly fill out your tax forms, it is imperative that paystubs are accurate and easy to keep track of. Providing the IRS false or inaccurate information can lead to serious consequences. An individual caught doing this will be fined between $5,000 and $20,000, and in some cases, face imprisonment. Further, scrupulous audits will immediately begin in case there are other examples of wrongdoing.
The paycheck stub generator being used to create paystubs for independent contractors needs to be reliable and easy to use. For both the paystub provider and the paystub recipient’s sake, the information on the stub must be accurate. At Check Stub Maker, we provide the necessary tools to guarantee a system that will be beneficial to you. Try it for yourself by visiting our Build Your Own Paystub page. Continue reading below to learn more about the important details of filing your taxes as an independent contractor.
Independent contractor defined
First, it is important to know what actually defines an independent contractor. Whether the profession in question is a doctor, accountant, lawyer, writer, etc., it all depends on the nature of your work and how that individual makes money.
The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. Further, if a company paid an individual more than $600 to someone who is not your employee, a 1099-NEC Form needs to be completed, copied, and also sent to that individual.
The 1099-NEC Form is required to be completed by January 31st at the latest. Most importantly, a copy must also be sent to the IRS by that date as well.
What is a 1099-NEC Form?
Essentially, it is a tax form used by the IRS to report any payments to independent contractors, freelancers, or self-employed individuals. In the past, these professionals would have to report their finances using the 1099-MISC form. In 2020 that changed. They improved upon that outdated form to make reporting these payments simpler by updating it to the 1099-NEC.
All nonemployee compensation needs to be accurately reported on this form. On it, you will need to fill out:
- Address for both Payer & Recipient
- Payer/Recipient TIN (Taxpayer Identification Number)
- Total nonemployee compensation
- Federal income tax withheld
- State tax withheld
- State income
Where to find your TIN
Anybody’s taxpayer identification number (TIN) is issued by either the Social Security Administration (SSA) or the Internal Revenue Service (IRS). Any tax returns in the past should have your identification number on it to help you find it. Also, any documents filed with the IRS should typically have your TIN on it as well.
Accuracy is our specialty
Having a reliable paystub generator is imperative to a smooth tax season if you are/work with independent contractors. You need to guarantee that all information reported is accurate and precise. At Check Stub Maker, we can help make that happen. You can even try it for yourself by visiting our Build Your Own Paystub page.