Introduction to 1099 MISC Tax Forms
1099 MISC forms are used by self employed people or businesses with sole proprietorship as its entity form. It doesn’t matter what kind of business they are in, either product base or service base. It is just another kind of IRS tax form dealing with incomes generated from miscellaneous sources like commissions, royalties, fees, rental properties or legal services. If you have received money as a result of prizes or awards should be falling under this category. Therefore, it is always good practice to keep the entire record of all kind of income history throughout the financial year. If you are non employee and working as an independent contractor type, then you will need to fill out the 1099 MISC form if the total earnings becomes more than $600. If the earnings are from royalties, then $10 is the bottom line and any amount more than that should be reported. However you should still report the income even if the total is lesser than $600.
Generally most people are having questions about this miscellaneous income sources and report process as they are not employee base, but IRS considers all the incomes be the same eventually. They put focus on the final revenue, no matter where the sources were originally. All incomes are taxable after all, regardless of employee’s status. If the 1099 forms are used, then the details of income will be filed under the label of non employment compensation, which will eventually be summed up to the final national taxes guideline. At the end, it will be same as W2 forms. Therefore any attempt to avoid taxes will only get worse and lead to the problematic situation where you would have to heavy penalty plus other legal issues.
If you are working as an independent contractor, you will need to ask for 1099 MISC tax forms from the company that you are working for. Ensure that you fill out all the details of each section properly and try not to leave any column blank. If there is anything typed wrong or incorrect, then it will delay the whole process. If you have found any fields to be corrected, then return the pre-filled form to the company for correction immediately. If the company didn’t fill it out originally, it is still your responsibility to do that. The due date for the form to be filled and reported is January 31st, but if needed the amended form can be filed by April 15th, otherwise there will be penalties depending on the case.
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