Does a 1099 Employee Need Copies of Checks for a Tax Return?
According to the Internal Revenue Service, or IRS, a 1099 employee is really not an employee at all, and is instead considered to be an independent contractor or self employed. The term 1099 refers to the tax form that must be provided by the payer to the independent contractor.
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Significance
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Independent contractors are people who work for themselves. The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work done for him and not what will be done and how it will be done. If the employer has the legal right to control the details of how the services are performed, the individual is an employee, not self employed.
Features
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The earnings of a person who is working as an independent contractor are reflected on the 1099 form. These earnings are subject to self-employment tax, which is a Social Security and Medicare tax paid by individuals who are self employed. According to the IRS, in 2010 the self-employment tax rate was 15.3 percent, with 12.4 percent for Social Security and 2.9 percent for Medicare.
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Filing
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When an independent contractor files his federal income tax return, he will need to include a 1099 form from each payer that he performed work for during the year, unless the amount he received was less than $400 for the tax year. He is also allowed deductions for business related expenses, but is not required to provide copies of checks written for expenses or those that he received as payment for services rendered.
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References
- Photo Credit tax time image by Tom Oliveira from Fotolia.com
