Form 1099-MISC reports all the non-employee compensation on every year-end summary. The IRS 1099-MISC Form covers royalties, independent contractor’s income, self-employment, rent, crop insurance proceeds, and various other kinds of miscellaneous income. Here in the Form 1099-MISC, MISC refers to the miscellaneous income, in short.
More about Form 1099 MISC Miscellaneous Income
As a taxpayer in the United States of America, you need to file your tax return every year without fail regardless of the amount of income you earned in the entire tax year. The Internal Revenue Service (IRS) has different forms that are customized for different taxpaying individuals and households.
If the taxpayer comes under the category of the self-employed, employed, local or foreign investor, farmer, fisherman, non-resident alien, student, trusts, charitable organization, etc. then they need more than a tax form for every tax season. The most common and frequent forms that the IRS receives annually is the 1099 form. The IRS 1099 form is for the individuals who earn their income that cannot be classified under salary, wage, or a tip.
The 1099 form has multiple variants, which is otherwise called as Information Returns. The IRS matches the provided information by the broker, government agency, lender, health insurance provider, debt issuer, employer, etc and the information given by the individual tax filers on their individual tax returns
The 1099 form variants include the income from the dividends (Form 1099 DIV), interest payments (Form 1099 INT), unemployment compensation (Form 1099 G), IRA withdrawals (Form 1099 R), real estate transactions (Form 1099 S) etc. Among those versions of 1099 forms, 1099 MISC (Miscellaneous Income) is the most popular among the individuals and reported by most of the freelancers, independent contractors, self-employed or sole-proprietors.
Do I need to file the IRS 1099 MISC Form?
The 1099 MISC form is to report on any income that cannot be provided in other tax forms of the IRS. Hence, the form is named as a miscellaneous income form. You may be a freelancer, taking your work at your leisure time may be a writer, artist, software developer and contribute your services to other businesses or individuals for a certain period with a reasonable income. In that case, the income earned in that given time comes under the category of miscellaneous income and you need to report the same on the tax return to the IRS.
Here enter the income and file them with the IRS using the 1099-MISC Form. You may receive multiple 1099-MISC forms if you are providing your services to more than a client.
Form 1099 MISC Work
If you are a client or holds a business and pays a vendor for his / her services, then you must issue form 1099-MISC to the payee before 31st January of the subsequent year. In addition to that, you must also file a copy of the form to the IRS before the due date of February when filing manually or March when filing electronically.
While the IRS form 1099-MISC is meant for information return, it carries all the information and not related to the income tax forms that are filed with the state and the federal government. You need to issue only one form to each contract worker.
You need to generate the form and issue the form 1099-MISC if you pay $ 600 or more to a non-employee over the course of the tax year. If the payment amount is less than $ 600 then you no need to report to the IRS. But when you are a freelancer who earns $ 400 from 7 different clients during the tax year, you must file and pay the taxes on the earned income even though you didn’t receive the 1099-MISC forms from each of the clients.
Apart from using the IRS 1099-MISC form to report the payments that you made to your non-employee, as a client, you should use this form to state any payment of at least $ 10 in royalties and $ 600 for non-services like attorney fees, rent, medical and healthcare, awards and prizes to non-employees, fish purchased from a fish vendor.
Before preparing a Form 1099-MISC for a vendor, request a W 9 form, and get it from each contractor. To add the note to the point, W 9 form is a record used to certify the non-employee’s name, contact address, Taxpayer Identification Number (TIN), Social Security Number (SSN), US citizenship, or Foreign Account Tax Compliance Act (FATCA) code.
Hope this article gave a clear picture of the Form 1099-MISC, Miscellaneous Income. For further assistance and Clarification, you are just a call away from us to reach our customer support team at 703-229- 0326 or drop a mail at email@example.com. We are happy to assist and serve you at any time.