What is a 1099?

March 31, 2009 by  Filed under: Taxes 

With people’s growing dependence on the Internet in recent years, many people have been wondering what a 1099 is. If you have done any type of business online, you need to be aware of this tax form. It is used to report miscellaneous income in a person’s life. Traditionally, this form was used only for people to claim their winnings. This use has increased drastically in past years because more people depend on the Internet for income. They don’t necessarily have an employer, but they still are making money. Whether this money is made from eBay or from your blog, you have to claim that money to the IRS.

One common misconception regarding 1099 forms is that people believe they don’t have to claim money if it is less than $600. All money, regardless of the amount, needs claiming. Because there was not money withheld from individual’s payment for independent work, the 1099 form figures out how much should be owed. The deductions aren’t as numerous as with regular employee tax forms because there is no need to withhold for medical or social security.

If you are just starting out working solely online as a freelancer or independent contractor, it is a good idea to hire someone to show you how to do your taxes using a 1099 form. They are quite different from the tax forms you may be familiar with, and you don’t want to make mistakes that will hurt you down the road. Another reason why it is a good idea to have a professional help you with your form is because you are able to write off certain tools needed for you to complete your work. For instance, if your work depends on having Internet access, you will be able to write off a portion of your Internet bill each month. The professional will be able to tell you how much and what you can write off.

There are different 1099 forms available, but the most common one is the 1099-MISC. This form covers all miscellaneous income you received in the past year. This could include online earnings from you job or winnings gained throughout the year. There are 23 different 1099 forms that can be used and they all have different purposes. For example, a 1099-H form is used to list any health insurance advance payments made from the past year. A 1099-S covers proceeds from real estate transactions. The main difference between all the 1099 forms and the regular tax forms is that 1099s follow the actual calendar year of Jan. 1 through Dec. 31.

A 1099 is an important tax form for anyone who is paid on a per job basis. This includes actors, writers, artists and freelancers. One good thing about using a 1099 form is that you are permitted to pay your owed taxes throughout the year. This will save you from having to pay a large sum of money at the end of the year. Many people save their money for other uses, so it is a good idea to have that option available.

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