January Tax Obligations for Business Owners

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January 31 is the deadline for businesses to send out 1099s and W-2s. In a nutshell, W-2s notify employees of how much federal and state tax has been withheld over the course of the year. A 1099, on the other hand, reports income a company has paid to an independent contractor. It's the IRS's way of making sure independent contractors pay taxes on the monies they receive for work.

Rhonda Abrams notes in a recent USA Today article that a 1099 is due any independent contractor a business has paid $600 or more during the year. The IRS offers a lengthy set of instructions on the who and what of 1099s, but Abrams offers a brief summary of who should receive one, including partnerships a company has paid $600 or more and corporations that a company has paid $600 or more for medical or legal services, and who shouldn't receive one.

January 31 is also the date your quarterly tax return from Q4 '05 is due (form 941) and any FUTA tax that you neglected to pay in full and on time last year (form 940).

You should check with your tax preparer for details and to ensure you have all of your bases covered when it comes to January 31. After all, the last thing you want to start the new year with is a penalty from the IRS.