Being Freelancer, Finances and Taxes

On-Demand Workers and 1099s

It’s October. Almost Trick a Treat and Scary things. So you want to make sure not be surprised at the end of the year. As a 1099er, it is time to start planning for when you pay your taxes. Here are some tips:

Jump-Starting the Process:

  • Make a list of companies who will pay you more than $600 for the year. This includes paying you for your services, providing rewards or spot bonuses or any other income
  • Get hold of form 1096 from the IRS.
  • Get hold of as many Form 1099-MISCfrom the IRS’ website you need to send out. Note: These forms are also built into accounting programs like those from Xero or Intuit’s Quickbooks. If you are old school, you can get them too from your local post office.
  • Remind your client (the person who hired you) to send you a 1099 (although it is responsibility:)
  • Final note: Lawyers are required to pay them.

A word about Paypal:

  • If you paid unincorporated businesses or independent workers electronically, such as through PayPal or a credit card, then you are not required to issue a 1099-MISC to that payee.
  • If you are paid consistently via PayPal, then Paypal must send you a 1099-K forms. (I will write more about this soon)

Sending 1099s Out:

  • Have your accountant or bookkeeper fill out each form (for each client you will need one)
  • Use a 1099-Misc Filing Service. Here are some to consider:
  • Answer key information such as:
    • Your name
    • Your address (even if you use your home as your business hideout)
    • Your Employment Identification Number (EIN) and in some cases you might provide your social security
    • Your client’s name, company name and address
  • Submit in triplicate
  • Mail copies to all recipients

The magic Box 7:

  • Box 7 is where you list non-employee compensation

Complete Form 1096:

  • Otherwise known as the “Annual Summary and Transmittal of U.S. Information Returns” form (1096 Form)
  • Must to be completed for each type of 1099 you submit. Note: If only 1099-MISCs, then you only need one 1096 attached to all your forms.
  • Attach all 1099s to your Form 1096 and mail them to the IRS.

Key Deadlines:

  • Your clients (the company) needs to mail your 1099s by January 31
    • If you don’t agree with the information your employer put in the form contact him and also explain it on your tax return.
    • If you receive a Form 1099, you can’t just ignore it, because the IRS won’t.
  • Form 1096 and copies of the 1099s need to be mailed to the IRS by Feb. 28.

Forms:

 

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