1099
Form |
What
is a 1099 Form?
As more businesses
turn away from traditional employees who require salaries,
benefits and income tax and Social Security withholding, they
are opting instead for the relative ease of the independent
contractor who is paid without with holdings and is hired
on a per-job or short-term basis. As the independent contractor,
or freelancer, is never a true employee of the company, at
tax time he is not treated as one.
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W-2s and 1099-MISC
The employee of a
company who is paid a salary with government withholding receives
a W-2 at the end of the year to use in preparing personal income
taxes. The independent contractor receives a 1099 form. There
are many different forms of 1099s, but the most common for freelancers
is the 1099-MISC. This 1099 form is for money paid that falls
outside of the traditional business norm – the salary.
Contractors are required by the government to use the 1099
forms as the basis for their tax returns. However, 1099s are
only sent out if the amount paid is greater than $600, so
there might not be a 1099 form for every job performed throughout
the year. The accounting for these projects falls to the contractor,
not the companies or individuals hiring him. Any 1099s received
should be filed with a paper tax return or stored if the return
is submitted electronically. The company who issues the 1099
form should store the other copy of the 1099 as part of its
taxes.
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2009
1099-MISC Form
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Other Types of 1099 Forms
While the 1099-MISC is the most common form of 1099, there are
many others to encompass the different ways that money can come
in the door throughout the year.
Additional 1099 forms can include:
- Proceeds from
a barter arrangement
- Debt cancellation
- Dividends paid
from IRA accounts, retirement funds or annuities
- Interest payments
- Distribution
of life-insurance payments
- Gambling winnings
- Rent received
from rental properties
- Money earned
from real-estate sales
- Payments from
the government
- Prize money
Paying Taxes and
1099 Forms
The government
requires contractors and other individuals to pay taxes based
on the amounts printed on the 1099 forms. As there is no withholding
from these forms, the individual who receives the money is
expected to plan ahead of time for these payments. In the
case of the independent contractor, based on the amount earned
by the business, the government might require quarterly tax
payments. If an overpayment occurs, the excess funds will
be returned as a tax refund.
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Disclaimer:
Please
note this web page is intended for general information relating
to 1099 tax forms. We recommend discussing specific tax-related
questions with a certified tax attorney. Please visit the
IRS.gov website
for any specific tax law information and updated tax forms.
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