Keeping it straight: Filing W-2 and 1099s

If January 31 had you scrambling to file W2s and 1099s for your small business, your best bet is to make a new year's resolution not to do again next year.  Here are the things you should know to get organized now and keep it all straight for now and later.

1. Always use official forms from the current year, not last year's leftovers.

2. Recipients (the employee or contractor) must have their correct W-2 or 1099 form by January 31.  The IRS also requires these forms are sealed in an envelope marked "Important Tax Information" – which can be in a pre-printed envelope or written by hand.

3. You must provide any contractor you paid more than $600 in wages in the calendar year a 1099-MISC form reporting the total income paid.

4. If you intend to print and mail the IRS its 1099-MISC copies, they must be the red Copy A and must be postmarked by Mar. 1, with a 1096 transmittal form to summarize the entire batch you are filing.

5. If you intend to e-file the IRS its copies, the deadline for doing so is March 31. If you don't have a dollar amount or information to put in a box, leave it blank

Get it right because penalties for incorrectly filed forms double in tax year 2011.