What Is Form 1099 Misc?
The 1099-MISC exists for people to report miscellaneous sources of income, according to the Internal Revenue Service. Even if a person holds a job where they receive a regular wage, he can still receive this form. A freelance worker, for example, would receive this because he does not have a single employer.
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Features
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People should receive a 1099-MISC from an employer as long as they receive more than $600 for performing services, such as consultations, a prize or rent from any one party, according to the IRS. Additionally, you must file this form if you make at least $10 in royalties. Those who earned at least $5,000 from selling products that are not intended for sale at a permanent retail establishment need to file this form, too.
Misconceptions
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Taxpayers still sometimes need to file this form even if they work for a single employer. Employers may reclassify people as "independent contractors," according to the University of Iowa. In this case, the employer does not consider the individual a regular employee, but somebody who performs regular services. Pay does not necessarily make someone an employee, but how the employer treats the individual. An employer may consider someone an independent contractor, for example, if they do not schedule regular work hours or specify how the person engages in work.
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Exceptions
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The IRS does not require people to report income on a 1099 if they receive money from a scholarship, even if it counts as taxable income (this gets reported on a W-2). Informants that work with a government agency are also not considered independent contractors. Business accounts, payments to a nonprofit entity or plan and money paid to a corporation (except legal services) also do not meet the criteria of a 1099.
Warning
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The person/business that pays for the services of an independent contractor must send the individual a 1099-MISC form, according to the IRS. The IRS provides a sample form on its website, but taxpayers cannot use a printed version. If a taxpayer sends a printed form, the IRS may impose a $50 penalty because they cannot properly scan a 1099 they or a business does not issue.
Tip
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A person who receives supplementary income and receives a 1099 usually files a 1040C to report side income, according to All Law. Also, even if a person does not make $600 from any one source, he must report all sources of income. Because Schedule C forms are more prone to errors than most returns and undergo an audit, All Law suggests that those who receive a 1099 keep detailed records of their income.
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