Getting audited by the IRS is no fun to think about much less go through
. That is the fear however for many independent contractors or people commonly referred to as 1099s. The IRS has been kind enough to post a video online about what that process is. Enjoy:
To further ease these concerns, 1099s or independent contractors can also set up relationships with payroll service companies. These companies work pretty simply. After setting up an account and with the contractor's permission, the payroll company takes money that they earn out of their business account and pays any taxes or other obligations they may have. They then deposit the remaining money into the contractor's personal checking or savings account.
They take a fee for this of course. But to get rid of potential IRS headaches its worth every dollar. Then depending on how contractors are organized they can receive a W2 at the end of the year to simply give to their accountant.
Now many people have accountants they work very well with. They can still keep that relationship but this actually makes the accountant's job a little bit easier. Also many of the payroll firms will take on any liability if there's a discrepancy in the taxes that were paid. Accountants don't do that.
Finally, as an added incentive many of the payroll companies offer benefits like health insurance and retirement planning.
So if you fear the IRS knocking on your door for an audit, the attached video and setting up a relationship with a payroll service company can offer you great peace of mind.