What is Form 1099?
In the arena of taxation, companies, small businesses and other entities use a variety of tax forms that record the money earned by an independent contractor or employee. In most cases, employees get a W-2 form, which lists their earnings and deductions for federal/state taxes, and contributions to social security. The 1099 form is a little different; it is given to a freelancer as a record of the money they’ve earned from a specific company.
On the Form 1099, the contractor’s income is listed, but there are no deductions for state or federal taxes, or for Social Security or Medicare. Since the person getting the 1099 is not an employee, the business is only liable to them for the income, not for deductions. The income listed on the 1099 is reported to the IRS so that they can track it; the freelancer is liable for their own tax deductions.
Those who get 1099 income come from all walks of life. Writers, novelists, artists, actors and musicians are usually compensated per job, and are not regarded as employees. Many companies are using contractors on a similar basis, which helps them keep their costs down as they don’t have to pay for health coverage or a retirement plan. When the job is over, the employer’s only obligation to the contractor is to pay them and issue a 1099 form.
The 1099 Misc. form is the most commonly used, but the 1099 is also used to list the interest the government has paid in a certain tax year, and the 1099 G details tax refunds received from the government.
Download Form 1099 at: http://www.irs.gov/pub/irs-pdf/f1099msc.pdf