As a solopreneur or small business owner, especially one with employees or independent contractors, handling payroll may not always be top of mind—especially if you're not using a formal payroll service. But come year-end, there’s a critical task that requires your attention: filing W-2 and 1099-NEC forms for your employees and independent contractors. It's important to stay on top of this to avoid costly mistakes and penalties, especially if you don’t have a full-time payroll service.
Year-end Payroll Tasks
By January 31, 2025, you need to issue W-2 forms to any employees you had during 2024 and 1099-NEC forms to any independent contractors who earned over $600 during 2024. These forms need to be sent to both the recipients (your employees and independent contractors) and the IRS by the same deadline.
Why It's Important
This filing is more than just paperwork—it’s a critical part of keeping your business running smoothly and legally. If you miss the deadline or make errors in your filings, you could face penalties from the IRS. More importantly, incorrect or missing forms could cause delays in your employees' and independent contractors' tax filings. This can lead to frustration, confusion, and even damaged relationships with your team or independent contractors.
A Quick Reminder
Before you even think about the end-of-year filing, it’s important to remember that if you're paying independent contractors, you need to collect a W-9 form from anyone who you expect to pay over $600 during the year. This form provides the correct tax identification information, which ensures that you’re reporting the right details when you file their 1099-NEC forms. If you haven’t collected this information yet, take the time now to reach out to your independent contractors and get the necessary W-9s in place.
What Happens if Your Forms are Incorrect or Delivered Late
If your W-2 and/or 1099-NEC forms are incorrect, incomplete or late, the consequences can be serious for both your business and the individuals you work with.
For your business: Errors and delays in year-end payroll filings can lead to incorrect books, inaccurate tax filings, and possible penalties from the IRS. This can cause long-term issues, including audits, fines, and reputational damage.
For your employees and independent contractors: If the year-end payroll filings that you issue are incorrect or late, it can delay their tax filings, lead to filing discrepancies that may get flagged by taxation authorities, or even require them to amend already filed returns. At a minimum, this would be frustrating, but it could also cost them time and money if amendments are required or if any penalties are assessed, thus harming your professional relationships.
Action Steps
To avoid these pitfalls, take the time now to review your records and ensure all payments to employees and independent contractors have been properly tracked. Make sure you’ve collected all necessary W-9s, and be proactive about preparing your W-2 and 1099-NEC forms to ensure they’re accurate and submitted on time by January 31st. Not only will this help your business stay compliant, but it will also keep your team and independent contractors happy and maintain your reputation as a responsible business owner.
Need Help?
If all of this seems overwhelming, don’t worry—we're here to help. Reach out for a payroll consultation to ensure you’re meeting all your filing obligations and avoiding common mistakes. We’ll walk you through the process so you can focus on what matters most—growing your business.
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