What is the IRS 1099 Form and Do I Need One?
Quick Tips on How to Handle a 1099-MISC Tax Form
Being self-employed has many advantages, including getting paid in full without employer deductions. As an independent contractor, freelancer or self-employed individual, getting a check for the gross amount owed to you can be pretty exciting. Nevertheless, Uncle Sam still wants his cut. This is where the 1099-MISC tax form comes in. Whether you just received your first 1099 or need to send someone a 1099, here is a simple breakdown of how it all works.
What Is a 1099-MISC Tax Form?
The 1099-MISC Form is similar to the W-2, in that it reports income to the worker and the IRS. The difference is that the 1099-MISC is used by businesses who pay contractors or freelancers $600 or more during a calendar year. While employers deduct taxes from your income and report it and your income on a W-2, clients who hire you as a contractor don't make any deductions, but still report what they paid to you on the 1099-MISC.
What to Do If You Receive a 1099-MISC Form
Legally, all individuals or companies who pay independent contractor or freelancer $600 or more during the year are required to send a 1099 Form by January 31st of the tax-filing year. If you did freelance or contract work for which you were paid $600 or more by a business in a year, you should expect to have at 1099-MISC by the end of January the following year. For example, if you earned $600 from Business A in 2017, you should receive a 1099-MISC from it by January 2018.
Note, that if you earned less than $600, the company is not required to send you a 1099-MISC, but you are still required to report the income you earned.
There are two reasons you might not receive a 1099-MISC:
1. If your total payment was less than $600 total, the payee doesn’t have to send a 1099 Form.
2. If your payment was $600 or more, your payee may have just forgotten, in which case, you should contact the company. If you hadn't already filled out the W-9 Form (similar to the W-4 for employees), which provides your social security number or tax-ID number (EIN) you should send one when you make the request for the 1099.
If you work for several clients/businesses, earning over $600 from each, you'll receive a 1099-MISC from each. If you worked for several clients, but didn't earn $600 from each, you may not receive a 1099-MISC, but you're still responsible for including income you earned from them on your taxes on Schedule C.
What to Do If You Need to Provide a 1099-MISC Form
If you've outsourced work in your home business to other freelancers or contractors, you need to ask them to fill out a W-9. If you paid them more than $600, you need to prepare and send them a 1099-MISC at the end of January following the year they did the work. You also need to send a copy to the IRS. The IRS has specific instructions about sending the 1099-MISC in, including what paper to use.
For example, if you've hired a virtual assistant, a web designer, and social media manager, and paid them all over $600 over the course of a calendar year, you'd need to send them each a 1099-MISC by January 31 of the following year.
If you paid the web designer less than $600 during the year, you wouldn't need to send a 1099 to that person.
Note that attorney fees of $600 or more may be handled differently than the traditional 1099. Check out the to get clarification.
While it seems like a lot of work and hassle, money you pay to contractors can be a tax deduction.
Incorrect 1099 Forms
If you've received 1099 with inaccurate information, contact the sender to request a new one with the right info. If you sent a 1099 with incorrect information, void and resubmit an updated one to the contractor and the IRS.
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Updated December 2017 Leslie Truex