Reporting 1099 Misc Earnings To The IRS?

Answer 1

A Form 1099 Misc is used when an individual is earning income as a non-employee. Many independent subcontractors will enter into an agreement with a firm to perform work compensated for in the form of wages not reported on a W-2 form. The income is taxable but estimated tax has not been withheld. The contractor or broker will send a copy to the IRS and another copy to the person filing taxes.

Inspect The 1099 Misc Form Carefully

The Form 1099 Misc is issued soon after the beginning of the calendar year. In some respects it looks much like a W-2 form sent to employees. The form will show the total compensation earned by the self-employed individual through his or her work performed for the issuer. It will also indicate that no taxes were withheld during the previous calendar year. Those who are self employed and have kept records of their earnings for the previous year should check to see that the figures on the 1099 Misc are equal to what the individual's own records indicate.

Reporting Earnings To The IRS

Unlike a W-2 form the 1099 Misc does not have to be sent to the IRS by the individual filing a tax statement. Instead the total earned is reported on the Form 1040. Because this income is taxable the amount listed will be subject to self employment tax as well as regular income tax. In most cases the taxpayer will have to file a Form 1040 rather than a 1040 A or 1040EZ. The taxpayer will also have to file a Schedule C to report business profit and loss.

Reporting 1099 Misc Income For Non-Inventory Businesses

Earnings through royalties do not always involve a business expense for the taxpayer. If the total shown on the 1099 Misc is the only compensation earned by the taxpayer during the previous tax year a From 4562 will not have to be filed. However the total on the 1099 Misc must be reported on a Schedule SE for the purpose of figuring the amount of self-employment tax that must be paid to the IRS. If the total figured on the Schedule SE is less than $400 self employment tax does not have to be paid to the IRS but the information on the 1099 Misc must still be included on the tax return.