How to Report and Pay Taxes on 1099 Income with Appropriate Form

When you have received a 1099-MISC from the person who paid you for your service that you did during the last tax year. Now what to do with the 1099-MISC form will be a question. To know better read on the article.

What Do If you receive 1099-MISC Form?

1099-MISC form is to report amounts paid to the non-employees ( independent contractors, freelance workers, and other businesses to whom payments are made)

Non-employees get 1099-MISC each year as the employees receive W2 forms which is at the end of January and the information needs to be added in the recipient’s income tax return.

When you are doing your tax return on your own using tax software program, you may be asked whether you have any 1099 income. Here, you may add the information from the received form.

When you are doing the tax return through a tax preparer, provide the received form to the tax preparer along with the other related documents.

Social Security and Medical taxes on 1099 income

As a US tax payer, you should pay the Social Security and Medicare taxes on your income. This is called as self-employment taxes for self-employed professionals. The taxes are calculated on the federal income tax return of the individual based on the net income from the business.

How to include 1099 income on tax return?

Including the 1099 income tax return depends on the type of the business you own. When you are a single member LLC owner or sole proprietor, you can report the 1099 income on the Schedule C Profit or Loss from Business. On completing the Schedule C you will report all the business expenses and income. To report the business expenses like professional fees, purchasing business equipment or supplies and other business office expenses decrease the net income from the business. The personal income taxes are influenced by the total adjusted gross income.

When the business is multiple member LLC, partnership or corporation, 1099 income can be reported as a part of the business income return.

Why the taxes are not taken out of my 1099-MISC income?

Employers withhold the federal income taxes from the independent contractors except few situations such as backup withholding. Employers do not withhold the Medicare and Social security taxes from their non-employees( independent contractors or freelancers).

Income tax withheld from 1099-MISC income?

No federal income taxes are withheld from the independent contractors or non-employees. But the IRS requires backup holding under a circumstance. When the independent contractor did not provide the taxpayer ID number or of the taxpayer is invalid or missing, then the IRS will send a notice to the tax payer to backup withholding.

What If you are not Self-employed?  

When you do not consider self-employed, reporting the income on the personal tax return is based on where it is present on the 1099-MISC form

  • When the income is reported in the Box 3 of the Form, in Other Income, add the information on the 1099-MISC on Line 21, Other Income.
  • When the 1099-MISC is reported in the Box 7 of the form, under Non Employee Income, you can report this income also on the Line 21 of your personal tax return.

Hope this article gave a wide information about reporting and paying the taxes on 1099 income. For further information call us at contact our customer support team at 703 229 0326 or mail us at support@tax2efile.com.

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