If you own a small business, chances are you will be dishing out some 1099s this year. Not sure what 1099s are, who should be getting them, and when they're due? Worry not – we've got you covered. Here's everything small business owners need to know about this common IRS tax form.
What are 1099s?
To put it simply, 1099 is a form used to claim miscellaneous types of income that fall outside the scope of wages, salaries, and tips. These outside income sources can include real estate transactions, self-employment, interest, short term contract work, long term contract work, and more.
Who Gets 1099s?
If you pay an independent contractor more than $600 between the months of January and December, you must file 1099 for that contractor. The form details the total payments issued to the said contractor, letting the IRS know how much in taxable income is owed. If you paid the contractor less than $600 that year, there's no need to file 1099.
Wondering what the difference is between an employee and a 1099 contractor? This is where things can get a bit tricky. In short, to be considered an independent contractor, one must be able to have control over the work he or she performs. Basically, you're not this person's boss. You are only using his or her contracted services.
When Are They Due?
Ideally, you want to get the contract or his or her copy of 1099 before January 31st. When it comes to filing with the IRS, electronic filing is the easiest and safest solution. Better yet, if you file electronically, the IRS allows you to do so up until April.
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