When working as a freelancer or independent contractor, clients are required to provide you with a 1099 form at the end of the calendar year. The form is required when total compensation exceeds $600 during each tax year.
A copy of the form is submitted to the IRS to help track miscellaneous income. Although there are variations of the 1099 to show interest and other types of payments, Form 1099-MISC is used to report payments to independent contractors.
Information employers need to know about payroll and taxes
Tax season is nearly upon the world again and, if you’re putting together tax information for your payroll employees, there are some guidelines and regulations you need to know to accurately and truthfully do this.
What is some of the basic information you need to know when it comes to payroll and taxes?
1 – Determine the net pay
It doesn’t matter how employees are paid – weekly, bi-weekly or monthly, you’ll have to figure out how much their net pay is. How is this done? You take their gross pay (hourly or salary) and minus the statutory payroll tax deductions, per the payroll calendar dates. From that, you take away from the voluntary payroll tax deductions to get the net pay.
2 – Withheld taxes and deductions
The majority of the payroll tax will have to be withheld from the paycheck of your employees. The following taxes to be withheld are:
- Local taxes
- State taxes
- Federal income tax
- Medicare tax
- Social security tax
There are several voluntary payroll deductions that will need to be paid along with the tax payroll 2017 deductions, either before or after the taxes are paid for. These include:
- Health insurance premiums
- Dental insurance premiums
- Vision insurance premiums
- Retirement plan contributions (stock purchase plan, union dues, 401k plan, uniforms and meals.
- Life insurance premiums
3 – Employers are responsible for part of payroll taxes
Yes, employers are accountable for some part of the payroll taxes such as:
- State unemployment tax
- Social security tax
- Medicare taxes
- Federal unemployment tax
To report the federal unemployment tax, employers will need to use either the form 940, form 941 or 940EZ. To report the employers’ quarterly payroll, they will need the form 941. To report the yearly withheld federal income tax, they will need the form 945. On top of all this, they must provide their employees with a W-2 form.