Did you get help with your business this year? Don’t forget that while you are waiting for your tax documents, you might have to provide some of your own. In general, if you hired an independent contractor and paid them more than $600 over the course of last year, you will need to send them a 1099-MISC.
The 1099-MISC is designed to help the IRS identify income that falls outside the traditional employer/employee relationship tracked by the W-2. The rule is designed for businesses and not individuals; if you hire someone to do $600 of work on your personal home, a 1099 isn’t required. The person doing the work is responsible for reporting his or her own income. Things start to get a little more complicated if you have a home office. Work done at your personal residence, that you want to write off as part of your home office deduction, may require you to issue a 1099. Remember, that same contractor, doing the same work at your office, would definitely require a 1099.
Also keep in mind that the $600 lower limit is the aggregate given to a contractor over a year. A quarterly service from an independent contractor that costs $150 for each visit or a $50 monthly service both meet the IRS requirement for a 1099-MISC.
All issued 1099-MISCs need to be post marked by January 31st. Just like waiting for your W-2s and other tax documents, independent contractors need these to file their own tax returns.
As always, contact your tax professional if you have questions or need help determining if you need to issue any 1099s.
1099-MISC General Rules:
What is a 1099-MISC?
- A form typically used by business entities and self-employed individuals to report payments made to an independent contractor or vendor for services rendered.
Who should receive a 1099-MISC?
- Each independent contractor or vendor that you have paid at least $10 in royalties to or broker payments in lieu of dividends or tax exempt interest;
- Each independent contractor or vendor that you have paid an aggregate of $600 or more to in rents, services (including parts and materials), prizes and awards, other income payments, etc;
- Any fishing boat proceeds;
- Aggregate gross proceeds of $600 or more paid to an attorney during the year (regardless of whether or not the law firm is a professional corporation), or;
- Any individual from whom you withheld any federal income tax under the backup withholding rules regardless of the amount of the payment.
Who else must receive a 1099-MISC?
- A copy of every 1099 MISC you send to a vendor must also be sent to the IRS.
What are the deadlines?
- January 31 all 1099s must be postmarked to the recipients.
- January 31 all 1099s must be filed with the IRS.