The Internal Revenue Service, or IRS, requires U.S. businesses to fill out a 1099 form for any independent contractor who gets paid more than $600 during that year. This form is actually a version of the 1099 called the 1099-MISC. Other forms of the 1099 record dividends and interest payments, but these are less common than the 1099-MISC.
One copy of the 1099 gets sent to the independent contractor and one copy stays at the business. The company can choose to send a copy to the IRS as well, but it is not required to do so. The company does have to send the IRS a separate form, called the 1096 form, that states the total amount paid out to all 1099 recipients that year.
Independent Contractors and the 1099 Form
Independent contractors carry out work for a business, but they are not employees. Instead, they are considered self-employed and are responsible for their own taxes.
A business has to withhold taxes from the pay of regular employees, but not from independent contractors. Regular employees are paid either a salary or an hourly wage, while independent contractors can be paid hourly or paid a flat fee for a given project.
Because of the differences between employees and independent contractors, the business cannot provide an independent contractor with the usual tax forms that a regular employee receives. The 1099 does not include any tax withholding information.
Filing Taxes Using the Form 1099
An independent contractor files taxes as a self-employed individual. This involves either filing at the end of the fiscal year or filing quarterly, depending on the contractor's specific circumstances.
An independent contractor may have multiple 1099 forms from different businesses if he or she performed work for more than one company over the course of the year. When the independent contractor files his or her taxes, he or she must submit the information from all of the 1099 forms to the IRS as an indication of his or her income.
An independent contractor might also have other income that is not recorded on a 1099 form. This can occur when someone does work for a company and is paid less than $600, which is the threshold for reporting. If the independent contractor does work for a company based outside the U.S., he or she might have income from that company that is not recorded on a 1099 form. Regardless of whether the income is listed on a 1099 form or not, it still needs to be reported to the IRS.
