When you are self-employed or working on a contract basis without withholding the taxes, then your income will be reported under different tax forms like: 1099 MISC Form or 1099 K Form. Consultants or freelancers who receive $600 or more during a tax year can receive 1099 MISC form, on the other hand a freelancer who works on-demand economy such as Lyft or Uber will receive 1099 K Form. So in this article let us find the difference between the two forms 100 MISC and 1099 K.
Differences Between 1099-MISC and 1099-K Forms
An independent contractor or a self-employed person receives 1099 MISC, when they are paid with $ 600 or more during the tax year for their service. The employer will never trigger a 1099 MISC when the wages is under $ 600, but as a tax payer you are responsible to report all the income you earned throughout the year and whether you received a 1099 MISC or not. A self –employed person must report the self- employment when the net earnings is $ 600 or more.
In this case, the process to file the tax returns will differ from the normal tax payer who receives regular employment income, which is reported on W 2. If you received a 1099 MISC form, then you may claim the deductions on a Schedule C, that is used to calculate the profits from the self –employment. But to do that, you no need to know about the Schedule C. ETax1099 will question you based on the situation and complete the form for you depending on the answers you provide, so it is not a big deal for you.
1099 K Form is also called as Payment card and Third party network transactions. This is used by the credit card companies and other third party networks like amazon and paypal to report the payment transactions that they process for third parties and retailers.
You may receive a 1099 K form when you accepted the debit cards, credit cards or pre- paid cards and made over $ 20,000 in sales and more than 200 individual transactions via third party processor. This reports the gross amount of the transactions, that is when you are a driver of a Uber or Lyft, your pay, commissions, phone rental payments or safe rider fees will not be deducted. These can be deducted as a part of the business expenses with the mileage you drove with the company.
Your ride operator or other economy partner will give you the tax summary, which you may use to transfer to the 1099 K information into some of the expenses and income to report while you filing the self –employment taxes.
You must not receive a 1099 K form or a 1099 MISC form for the same income. 1099 MISC income reported must not include the payments that are made with the payment card, credit card, or other third party network transaction but on the other hand all the businesses will not complete the 1099 MISC form correctly. When you find the 1099 MISC contains the income that are reported on 1099 K you may request to issue a corrected 1099 MISC Form.