IRS 1099 Questions

Independent contractors work for various clients but are not employees of any one client. They must report their income to the Internal Revenue Service (IRS) as self-employment income if they make more than $400 per year. Each client is responsible for giving the independent contractor a form 1099 in January so that the contractor can accurately report income on his taxes

Who Gets a 1099?

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If you paid any independent contractor $600 or more over the past year for services, you must prepare a 1099 for that contractor. Send 1099 forms out by January 31 of each year. You should send 1099 forms to contractors even if they do business as a limited liability partnership or limited liability corporation. The IRS does not view these entities as separate from their owners, meaning the owner is personally liable for taxes due.

What are the Difference between 1099s and W-2s?

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1099 forms are sent to independent contractors, while W-2 forms are sent to employees. You are responsible for payroll taxes for your employees, including Social Security and Medicare taxes; independent contractors must pay these taxes themselves. If you are not sure whether a worker qualifies as an independent contractor, consult an attorney before sending him a tax form. If you send a W-2 form, you are declaring that the person is your employee and must pay payroll taxes even if she qualifies as an independent contractor under tax laws.

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If A Contractor Only Works for Me, Does That Make Him an Employee?

As of 2012, U.S. tax law states that an independent contractor who works for only one client is an employee under certain circumstances. However, if the contractor works from home, works less than 1,000 hours annually and bills you for her hours, she may still be considered a contractor, requiring you to send her a 1099.
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