The IRS requires certain forms to be filled out and submitted who makes certain kinds of payments. The IRS 1099- MISC can be used to cover payments you receive from rental property, royalties, prizes, awards, and substitute payments instead of dividends. The most common use of this form is to report the earnings if you work as an independent contractor, such as a freelance writer. You only have to submit a form 1099-MISC if you made over $600 from a client.
What is the Tax Form 1099-MISC?
Even as an independent contractor you have to report all of your earnings on your tax return, but you do so in a different way than normal employees, who pay taxes right out of their paychecks. If your freelance work is more of a side job and not your main source of income you can just include the payments in “other income” which will go on the first page of your tax return. However, if your main job is being an independent contractor and you make substantial money from doing so the IRS will think of you as being self-employed. All self-employed taxpayers must file 1099-MISC income which you would attach to your return. You are also liable for all Social Security and Medicare taxes which you would calculate on the tax form Schedule SE and attach it to your return.
What else do I need to know about the form 1099-MISC?
There are many advantages in earnings non-employee income and having to file a 1099-MISC. The biggest benefit is that you can claim a lot of different deductions from your business that people with regular jobs can’t. You are able to deduct items based on if they are used for work only, such as an office space in your home, computer, car, all office supplies, tools, and other items can be itemized and lower your tax bill. You will also need to send out form 1099-MISC to each person that you have paid for services or goods over 600 in the year. This includes if you paid over 10.00 in royalties or broker payments instead of dividends, if you have paid someone medical payments, rents, services (including parts and materials), cash payments if you bought fish from someone who has a catching business, if you sold your boat, or if you paid over 600.00 dollars to an attorney. You can file 1099-misc online or you can file it through the email attached to your tax return. The IRS prefers you send it electronically because it is easier for them to go through all the tax returns and saves a lot of paper and postage if you do it that way.
Filing your 1099 taxes can feel like a daunting task, so having someone prepare them for you may be a good idea. Filing your taxes has never been easier than now because there are many services and IRS approved websites that can help you file it quickly and accurately.