When you are an independent contractor or a small business, it might be confusing filing your taxes. When do you need a Form 1099-MISC? When do you NOT need one? How much do you need to make before you have to file? Understanding the different types of forms needed for specific businesses is one of the most common issues many taxpayers have, and not filing a Form 1099-MISC when one is required is a huge mistake a taxpayer can make.
What is a Form 1099-MISC?
Simply put, or in terms that a fifth grader (or myself, actually) can understand, a Form 1099-MISC lets the IRS know you received taxable payments at some point during the year. The IRS utilizes this tool as a means of fighting under-reporting income by the self-employed. The IRS has been known to impose stiff penalties on businesses which intentionally fail to file this form when required.
Landlords and Business Owners: Who Must File a Form 1099-MISC?
If you are a property owner and act as a landlord, you are required to file a 1099. Also, if you are an unincorporated independent contractor (a sole proprietor), you must file this form if you earn more than $600 a year for work done in the course of your trade or business–any trade or business that is performed for the purposes of gleaning a profit. It also applies to business owners who employs independent contractors or sole proprietors, you are required to file the 1099’s if you have paid out more than $600. You DON’T, however, have to file this form for non-business related services. These can include payments for household services such as babysitting, housekeeping, and gardening. Running your home isn’t considered a profit-making activity. But wouldn’t it be awesome if it was?
Self-employment is becoming more and more common as taxpayers decide they want to be their own bosses. Freelancing is something that is no longer just a position for the independently wealthy or those with an already-firm client base. Instead, people are able to set their own hours, and work on their terms, which is making the practice of hiring independent contractors and sole proprietors more commonplace. Many businesses find there are a lot of benefits to using outside contractors for certain facets of their business. But there is an enormous amount of pressure from the IRS to report these payments so that the earners are contributing properly to their tax liabilities. For more information, or to obtain a form, visit the IRS website.Landlords and Business Owners