Getting a 1099I am not a lawyer. Always ask a lawyer / tax advisor about your specific situation.
A 1099 is simply a way for the government to keep track of what money is paid to people, so it can make sure that the money is reported on tax forms. The payment must be $600 or more total over a year's time - the government doesn't want to get into $50 yearly payments to your babysitter!
But let's say that you are a writer. You write occasional articles for your local paper. The paper pays you $50 in Jan, $25 in Feb, and so on. By the end of the year, you've gotten $800 from the paper in total. The government of course wants their share of this income. So the government mandates that the publisher must send out 1099-MISC forms about this money. One copy goes to the IRS, so they know that this money went to you. The other copy of the 1099-MISC goes to you - to remind you to claim that income on your taxes!
So how do you properly handle this 1099? Well if you've had a job before, you know about W2s. A W2 is a statement of income from a job. In the job they already sent to the government your share of the taxes and social security due on it. They didn't pay *for* you - they took YOUR money and sent it to the IRS :) How helpful. In the case of a 1099, they did NOT do anything with your money. They simply gave it to you. It is now your responsibility to pay your fair share of that income to the government.
Most home businesses file their income on a regular 1040, using a Schedule C. You'll see on the Schedule C that there is a spot to list income. Well, this is some of your income! Simply add this 1099 value into your income spot, along with other income you've earned. In fact if you use a tax software package, it'll ask you for all your 1099 forms and you just enter each number one by one. Most home businesses get several 1099s each year, one from each income source they worked with. It's really very normal.
What if you make less than $600 from one source? Well, they don't have to send you a 1099. But it doesn't mean the money is free!! You're supposed to pay taxes on ALL income you get, not just "big incomes" :) So be sure to keep careful records and claim all income you receive properly. If you get audited, the government will be rather unhappy if you are found to be hiding income sources.
Taxes and your Home Business
Working from Home