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WHAT IS THE IRS FORM 1099-MISC?
The IRS requires any person or company who makes certain types of payments to report
them on a 1099-MISC to the recipient and the IRS. This informational form covers a wide
range of payments you receive, such as rent, royalties, prizes and awards and substitute
payments in lieu of dividends.
However, the more common use of the form is to report your earnings when you work as an independent contractor, such as a freelance
writer.
A 1099-MISC form serves a similar purpose to an independent contractor as a W-2 does for to
an employee. The form reports the total amount of payments you receive from a single
person or entity during the year that you provide services to. It includes some of your personal information such as name, address
and either Social Security number or employer identification number.
INFORMATION ON THE 1099-MISC
Most importantly, it will classify each type of payment in separate boxes on the form
depending on the reason for your payment. Generally, if you receive payment for contract work you do, then your annual earnings will
appear as nonemployee compensation.
INFORMATION ON THE 1099-MISC
Depending on how many different companies or people you receive payments from during
the year, you may receive more than one 1099-MISC. Each payer must complete the form if
during any year it pays you $600 or more.
WHO IS RESPONSIBLE FOR PREPARING A 1099-MISC?
However, if you earn $500 from 20 different companies, you still must report your income
even though you might not receive a single 1099-MISC. In most cases, the payer must
provide you with a copy of the form by January 31 of each year, as well as a copy to the IRS by
the last day in February.
WHO IS RESPONSIBLE FOR PREPARING A 1099-MISC?
As an independent contractor or freelancer, you report all earnings on your income tax return just like an employee does, but you do it in a
different way. If your freelance work is sporadic and generally not your main source of income,
then you can just include the payments in “other income” on the first page of your tax
return.
WHAT TO DO WITH A 1099-MISC
If you work as an independent contractor for substantial periods during the year, then the IRS will treat you as self-employed. Self-employed taxpayers must report 1099-MISC income on a
Schedule C attachment to their tax return
WHAT TO DO WITH A 1099-MISC
In addition, you are also liable for Social Security and Medicare taxes, which you
calculate on Schedule SE and attach to your return.
WHAT TO DO WITH A 1099-MISC
There are some tax advantages to earning nonemployee income on a 1099-MISC. One
benefit is that you have more freedom than an employee to claim deductions that relate to
your profession.
ADVANTAGES OF RECEIVING A 1099-MISC
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