Taxes: How to Keep What You Earn and Get Paid to Do It
Ah yes, tax season; when accountants across the country are called upon to assist millions of Americans with their taxes. In the last few years, a nice investment could have been made in companies that have created software to assist in this process. In this article, I want to address those who are receiving 1099 forms while living in the United States. Those paid via 1099 are usually hammered in taxes (and I am one of them) as we are responsible for federal, state, and local income tax (depending on where you live), as well as the dreaded self-employment tax. The IRS will match the 1099 form you received and claim with the one that each paying client sent to the IRS. There’s no way around it — Uncle Sam wants his cut.
Independent Contractors and the 1099
For the independent contractor, we will receive a 1099-MISC form any other company that services were provided for so long as the payments were at least $600 for the prior year. If you did not receive a 1099 in the mail, then you should contact the company you provided services for immediately. Bear in mind that if you made less than $600, you will not receive this form — generally speaking. But you still need to report the income on your tax filing. Of course, the rule is that you need to report any and all income earned even if it is under the $600 threshold pretty much no matter who or what the source of the payment. The IRS wants to know and expects their share.
Once you get the 1099-MISC form, you can then begin the process of putting together your tax return. For many independent contractors, this means filling out a Schedule C, which tallies up the income earned and any deductible expenses. There will also be a need to file a Schedule SE, which accounts for Social Security and Medicare payments (i.e the dreaded self-employment tax.)