It seems to be a trend recently for companies to shy away from the traditional employee model. For reasons that can be endlessly argued, companies and corporations are leaning towards a model based on the freelancer – especially as they’re growing, like many companies in Louisiana are. Freelancers are often used for one-off tasks that would traditionally be assigned to a specific employee. The big difference is, though, that freelancers aren’t awarded health or retirement benefits. While it’s more expensive in up-front costs, it saves the company in the long run.
So, freelance workers are becoming more common. Without a steady flow of revenue, though, how does a freelancer file their taxes? The answer is a 1099 form.
1099 series forms are used to report types of income other than wages, salaries, or tips, differentiating it from the W-2 form. This can include writers, actors, journalists, designers, independent contractors, etc. People who work on contracts receive payments for each transaction they do with various companies. These aren’t taxed like a traditional paycheck would be, so each of these transactions has its own 1099 form to fill out at the end of the year. Four copies are made of each transaction, one for the worker, one for the employer, one for the IRS, and one for the State Tax Department. Many local companies probably have a lot of paperwork left over from working with a Business Bank in New Orleans, but these are papers you’ll want to keep close track of.
If a freelancer has been particularly busy during the year and has racked up more than 250 transactions, it is required to fill them out online. Any less than that, paper is preferred as well as the submission of a form 1096, a type of summary form.
So, why is all of this relevant? For companies, it’s due at the end of this month (yes, that would mean later today). There are over 20 variations of the 1099 form, ranging from health insurance advance payments to miscellaneous income. And, if the 1099 applies to you, you may have a lot of forms to fill out. So, to anyone who hired a freelancer this year: get to filing!
This guest post was written by Eric Knoepfler in association with Hibernia Bank. The views expressed herein are those of the author and not necessarily those of any financial institution or bank. This article is intended to provide those reading it with information about matters of current interest. It should not be construed as legal or financial advice concerning a specific topic and should not be acted upon without contacting the appropriate professionals.