Wednesday, March 9, 2016

E-filing 1099s for Your Independent Contractors

Did you know that by the year 2020, nearly half of America’s workforce (40%) will be made up of independent contractors? And if you look at the ExpressIRSForms numbers, that’s no surprise: a majority of the forms we process and transmit to the IRS are 1099s (the independent contractor version of a W-2 form). But whether someone is considered an independent contractor or an employee in the eyes of the IRS isn’t always as black and white as it may sound. So sit back and take a listen to what makes your contractors so independent that you have to file a Form 1099.

Independent Contractors: What are They?
There are three categories the IRS looks at when considering whether or not the person you’re filing for is an independent contractor:
  • Behavioral: Do you control how, when, and where this person works?
  • Financial: Do you provide necessary tools, reimburse expenses, or pay a salary to this worker?
  • Relationship: Is this worker essential to daily operations of your business?
If your answers are mostly “yes” to these questions for a certain worker, the IRS considers that worker to be an employee, not an independent contractor. Typically, you’ll establish the status of your worker when you hire him/her, but these questions are good to keep in mind during filing time.

Still Not 1099% Sure?
If you need further classification on the differences between independent contractors and employees, you may need to consult with a tax or legal professional. The IRS also offers Form SS-8, which you can send to the IRS and, within six months, they’ll return it with the classification of your worker(s).

Misclassifying Workers
It’s important to make sure you know the status of your worker before you file anything for him/her, because the IRS isn’t too lenient when it comes to misclassifications. If you classify an independent contractor as an employee (or vice versa), you become liable for any:
  • unpaid Federal, State, and Local Income Tax,
  • Social Security & Medicare contributions,
  • unpaid Workers’ Compensation, and
  • Unemployment Insurance Premiums.
Additionally, beginning with the 2015 tax year, anyone with 50 or more employees who misclassified those employees will be assessed an additional penalty of $2,000 per employee.

E-filing Form 1099
So you’ve determined your workers are independent contractors, and you need to file a Form 1099-MISC (the miscellaneous revenue 1099 form) to report their wages. Now, all you need to do is e-file them with ExpressIRSForms, the most user-friendly IRS-authorized e-filing program around! Just log into your free account, select the big, orange Start New Form button, and the program takes you through the steps of quickly and easily transmitting your 1099 forms directly to the IRS.

If you realize you filed a W-2 when you should have filed a 1099, then it’s time to act. If it hasn't been long since you hit the Transmit button, click the Correction button next to the incorrect form, and our program will be able to recall your form, which will then show as Unsubmitted on your Dashboard. You can then delete that form and file the correct 1099. If your form was already submitted to the Social Security Administration (SSA), you’ll need to contact the W-2 hotline for cancelations, 1-800-772-6270, and they can direct you on how to proceed.

If you filed a 1099 when you should have filed a W-2, you can try to recall your form like in the example above. If your form has already been sent to the IRS, you can e-file a 1099 correction to void the 1099 before e-filing the correct W-2 form.

The Customer Support Spiel
If you have any questions about e-filing, or employee/independent contractor classifications, you can get in touch with our friendly, US-based customer support team. We’re available by phone (704-839-2270) and live chat ( Monday through Friday, 9:00 a.m. to 6:00 p.m. EST. You can also send us an email anytime at

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