Thursday, March 29, 2007

A 1099 Overview

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

No comments: