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How Do I Prepare End of Year Tax Reports on Form W-2 and Form 1099-MISC?


Question: How Do I Prepare End of Year Tax Reports on Form W-2 and Form 1099-MISC?
By the end of January each year, you must prepare and distribute a year-end wage and tax report for employees and independent contractors for the previous year. This report includes information on the total wages paid to that individual, tax withholding amounts, Social Security and Medicare wages, and other information needed to prepare the individual income tax return.

How Do I Prepare These End-of-Year Reports?

The process of preparing these reports is pretty simple, if you have kept good payroll records, that is.

1. Verify the taxpayer identification number (Social Security Number, Employer ID Number, or other tax ID number). The tax ID number must be on Form W-4 for employees or Form W-9 for contractors. If you don't have a valid tax ID number for a contractor, you must withhold federal income taxes from that worker (see this article about backup withholding for more information).

2. Verify personal information - name and address on the W-4 for employees or W-9 for contractors.

3. Verify wage and withholding information for the forms - gross wages for 2010, withholding, Social Security and Medicare wages, and other information.

4. Finally, figure out how you will print and distribute these payroll reports. Options for preparing year-end tax reports include getting the forms from the IRS, using a payroll service, or using tax software/online tax software.

5. Distribute no later than January 31 each year. If January 31 is a weekend, you have until the next business day to comply with this regulation. It's best not to wait until January 31 to send out these forms, because employees need them to complete their taxes. If you are mailing these forms, they should be mailed a few days before the end of the month.

It sounds easy, but if you haven't done it before, give yourself enough time to figure it out.

For More Information

Read more about How to Prepare Form W-2 for employees and Form 1099-MISC for contract workers.

More Information on End-of-Year Payroll Tax Reports for employees and contract workers.

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