June,
When is a 1099 necessary? How much money would I have to pay before I have to claim (tax) my subcontracted work?
Thanks.
Ryan, Graphic artist in Salt Lake City, UT
Hello Ryan,
So many people are confused about 1099s. Here's a quick summary.
At year-end employees must be sent a W-2 from their employer. A W-2 states wages earned.
At year-end, if a self-employed were paid $600 or more by an individual or a company, that individual or company should send a Form 1099-MISC to the self-employed. A 1099-MISC states self-employed income earned.
However, many times no 1099s are sent. Even if there's no 1099 the self-employed must report the income on his tax return -- no matter the amount.
Whether or not a self-employed will have a tax liability on his self-employed income depends on how much he has in expenses. And it also depends on all the other income and deductions on his tax return. Here's a couple columns from my website that give more explanation on which taxes you may have.
Taxes: Which ones and how much do I pay?
Estimated Tax:How much should I pay?
Keep in mind. there is a full explanation of income, expenses and taxes in my book, Self-employed Tax Solutions.
Best regards,
June
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