Like T.S. Eliot, you may think April is the cruelest month. But your tax season obligations start even sooner than April - by Jan. 31, 2001, you're required by the IRS to have issued W-2 and 1099 statements to all your employees and subcontractors.

If you use small business accounting software like QuickBooks or Peachtree, you can easily chug the statements out based on payroll and past payments. If you outsource your payroll, your payroll service can print them for you. (Not completely satisfied with your payroll service? This is probably a good time of the year to switch.)

If you don't use accounting software or a payroll service, you can fill the forms out by hand or type them out. You can order forms from the IRS by calling 1-800-829-3676 or going online at http://www.irs.gov/forms_pubs/order/index.html. But what if you forgot to give your workers the forms? You can request for an extension. Just make sure to mail a letter by Jan. 31 to:

IRS-Martinsburg Computing Center
Information Reporting Program
Attn: Extension of Time Coordinator
240 Murall Drive
Kearneysville, WV 25430

Include your name and address, your employer identification number, the type of return, a statement that you are requesting an extension to furnish the forms to workers, a reason for delay, and your signature or that of your authorized agent.

Now that you've asked the IRS for an extension to give the forms out, do you know where to begin? Here's a quick overview of what the W-2 and 1099 "information returns," as the IRS likes to call them, are about.

The W-2 form. The form W-2 is used by employers to report wages, tips, and other compensation paid to an employee. This form also reports the employee's income tax, Social Security taxes withheld, and any advanced earned income credit payments.

You have to provide the W-2 form to your employee and to the Social Security Administration by the Jan. 31 deadline. For complete IRS instructions on the W-2, visit http://www.irs.gov/prod/tax_edu/teletax/tc752.html.

The 1099-MISC. The form 1099-MISC is used by a person or a business to report payments made to another person who is not an employee - like a freelancer or subcontractor - or another business. The form is required when you make payments of at least $10 in gross royalties or $600 in rents or services.

As the one making the payments, you must provide the 1099 form to the IRS and to the person or business that received the payment by the Jan. 31 deadline.

A word of warning: You can accrue penalties of up to $50 for each form filed with incomplete data. Make sure you get the Social Security numbers and all essential information for subcontractors and freelancers. For complete IRS instructions on the 1099, visit http://ftp.fedworld.gov/pub/irs-pdf/i1099m.pdf.

How do you know if a worker is an employee or an independent contractor?

The distinction between the two types of workers can hold important tax consequences. The classification is based on a common law test under three main categories, according to the IRS Web site (http://www.irs.gov/prod/tax_edu/faq/faq12-2.html).

Behavioral control. If you provide your worker with extensive instructions on how the work is to be done or provide training about required procedures and methods, then your worker may be an employee.

Financial control. If your worker has significant dollar investment in the work, is not reimbursed for some or all business expenses, or makes a profit or a loss from the work, then that worker may be an independent contractor.