Guide to Form 1096 for US Employers: Learn which businesses must file Form 1096 and the consequences of not filing. Get details on obtaining free forms and submitting accurate reports to the IRS.
By Brad Nakase, Attorney
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Do you employ independent contractors who must file taxes in the US? The IRS Form 1099 serves the purpose of reporting non-wage earnings, so you might be acquainted with it.
The IRS summary form 1096 Form, which serves as the front page for various forms you file, such as Form 1099, may not be well known to you.
The goal of the 1096 Form, which firms must file it, the consequences of not filing it, as well as where to find free 1096 forms are all covered in this guide.
Let us now get started.
The Internal Revenue Service (IRS) issues the 1096 Form, the Annual Overview & Transmittal of American Information Returns.
Owners of businesses utilize this form to send information reports to the IRS. It functions as a summary page for reporting totals from forms like W-2G, 1099, and 1098, which provide information on bank transactions, deductions, and different kinds of non-employee earnings not included in the regular W-2 form.
The 1096 Form is meant to consolidate and summarize all of these separate forms’ data that is filed to the IRS into a single bundle. The IRS will find it simpler to process and validate the given data as a result.
To put it briefly, in order to guarantee correct financial transaction documentation and adherence to United States tax rules, CFOs & finance managers need to have this kind of form.
Companies, partnerships, estates, individuals, and trusts all need to complete Form 1096. Specific kinds of information returns must be sent to the IRS by these organizations.
To be more precise, Form 1096 is required for the forms that follow to be sent to the IRS via mail: 1099 (miscellaneous earnings), 3921 (running of an incentive shares option), 1098 (mortgage interest declaration), 3922 (transfer of shares acquired through a worker’s stock purchase schedule), W-2G (betting winnings), and 5498 (information about IRA contributions).
Basically, a 1096 Form must be sent with a batch of papers to summarize and send to the IRS if an organization files any of the above forms in the form of paper for reporting its financial operations or transactions as stipulated by tax rules.
Nope. If you are doing everything online, you are not required to provide Form 1096 because the summary data is automatically compiled and sent to the IRS by the computerized filing system.
Only in the event that your paperwork is being sent by mail is Form 1096 necessary.
You do not have to provide your contractors with 1096 forms, in contrast to 1099 forms. It is your duty as the company employing the contractor to turn in the 1096 Form. Form 1096 is not required for contractors to file their taxes.
Let’s take an example where your company employs a USA-based contractor to build a website. A Form 1099 is required to be issued to them, and a copy would need to be sent to the IRS. You would additionally need to post a 1096 Form to the IRS if you were submitting it by mail.
Remember that contractors who have no obligation to pay US taxes do not need to file Forms 1099 or 1096. However, the 1099 (as well as the 1096 if reporting on paper) is required for contractors to pay taxes, including American contractors residing overseas.
Indeed, the IRS website offers the 1096 Form for free download.
For preparation or informational purposes, you may print or download the 1096 Form; but, for paper filing, the IRS needs a physical, scannable document to be submitted.
Accordingly, you should utilize an IRS-approved edition of the 1096 Form for scanning when submitting it formally. The version that can be downloaded from the official website of the IRS might not be able to be scanned, which means that it might not be recognized as an actual paper submission.
Form 1096 can be ordered by phone at 1-800-829-3676 or at the IRS website. Within ten days, the form should be delivered to you.
Tax preparation assistance provided by professionals and tax software are additional sources of this form.
Using companies that offer 1096 forms for a nominal cost per document or signing up for a digital file-filling system are alternatives to obtaining them for free. To ensure that your documents are accepted and compliant by the IRS when you send them, these companies offer versions that have been approved by the IRS for scanning.
For instance, QuickBooks provides an electronic copy of the 1096 Form that may be completed online right from within its accounting program at a cost. Additionally, a subscription-based edition of pdfFiller is available for you to fill out digitally online, to be saved as a PDF, mailed to yourself, or stored in the cloud.
Buying forms from a supplier has the following advantages. Most of these platforms have embedded software packages to help in the filing and preparing of taxes. It also has the capability of populating the forms with the financial data that may be in the system thus eliminating the need for manually entering data and the eventual errors that may come along with it.
These systems frequently allow users to have access to tools as well as guidelines as well as customer services to assist them in completing and submitting the paperwork in the right manner. This comes in handy, especially for businesses that have no in-house tax consultant or advisor.
To obtain all the necessary information for the preparation of the tax return by purchasing services from a business supplier, you can incorporate the latest standards and changes by the IRS. With these measures, your firm can be certain that it is submitting its taxes at the right time and together with all of the necessary paperwork.
Completing Form 1096 is not that difficult. This is how you do it:
Entering your business details, such as the name of the company, address, and the no. of returns your company must file, is the initial step in filling out Form 1096.
Next, enter your personal data, being sure to include the following:
Additionally, there is a space to enter the accountant’s contact information for your business.
Fill in Box 1 with your EIN (Employer Identification Number), if you have one. In Box 2, provide your SSN (Social Security number) if you do not have an EIN.
Indicate how many forms you intend to send to the IRS. Put “5” in Box 3 if, for instance, you intend to file 5 1099-MISC forms.
Determine the total amount of federal income tax that has been withheld from all of the forms you are submitting, and enter it in Box 4.
Choose the return you want to file in Box 6 of Form 1096 as one of the final steps in the process. To indicate the information return you are sending to the IRS, mark it with an X.
If you’re submitting by mail, the following forms need an additional Form 1096:
Lastly, send the form to the IRS at the address given. Verify all the data you have entered before submitting, and create copies for your company’s records.
Every year on February 28, companies are required to file Form 1096 together with all supporting forms. On the other hand, you must file Form 1096 and Form 1099-MISC by January 31 if you are required to file them.
You will be assessed a $60 late filing charge for each Form 1096 that you fail to file if you choose to file by mail. This goes up to $120 for each form if, after thirty days, you still do not file. The fine is $310 for each form after August 1.
If a form is purposefully not filed, there is a $630 penalty.
Even while tax preparation can be difficult and complicated, it can become even more complicated if you have several contractors operating remotely in various places. This increases the risk of costly errors.
We make everything simple with our Contractor Management Platform. We can assist you with completing the 1099 Form for your American contractors as well. With it, you can onboard, oversee, and compensate your contractors all in one location. Additionally, we can assist you:
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Working with contractors headquartered in the US or abroad doesn’t simplify the tax landscape.
If your US-based business works with contractors and files by mail, it’s critical that you comprehend the specifications for the 1096 Form. You may ensure that you avoid expensive penalties by using the data provided in this tutorial to ensure that you file the appropriate documents on time.
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