IRS 1099 Contractor Requirements

The Internal Revenue Service (IRS) separates all workers into two categories: employees and self-employed individuals, including independent contractors. Independent contractors are people who are in business for themselves, rather than employees who the IRS views as working for the company. At the end of the year, instead of receiving a W-2 form to document taxable earnings from an employer, an independent contractor receives a Form 1099-MISC and has to calculate taxes differently.

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    Tax Withholding

        When you are paid as an independent contractor, you do not have any money withheld from your taxes for income taxes or payroll taxes. However, the IRS does not give you a free pass to not pay anything until income tax time. During the year, you must make at least quarterly tax withholding payments to pay for your taxes. You can determine how much you need to pay based on either your projected earnings and projected tax bill or based on the previous year's tax bill. Many prefer using the previous year's tax bill, because it gives a specific amount that must be paid to avoid IRS penalties. This calculation is different from calculating your total tax bill at the end of the year.

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    Payroll Taxes

        As an independent contractor, you do not have an employer to split the Social Security and Medicare taxes with. Instead, you must pay the entire amount yourself, under the self-employment tax. As of 2013, the Social Security tax rate equals 12.4 percent for the first $113,700 you earn, and the Medicare tax equals 2.9 percent of your entire income. The IRS requires you to fill out Schedule SE to calculate how much self-employment tax you owe if you make more than a certain amount. For 2013, you are required to pay self-employment taxes if your income exceeds $400 in self-employment income or more than $108.28 in church income.

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    Taxable Income

        If you are paid as an independent contractor and receive a Form 1099-MISC, you are eligible to deduct business expenses directly from your earnings on Schedule C, which is the form used to document your independent contractor income. For example, you can deduct car expenses and other costs to buy products involved in your business on Schedule C, rather than having to claim the expenses as itemized, miscellaneous deductions.

How to Generate a 1099-MISC LLC

An LLC must submit a 1099-MISC form for each person to whom it paid at least $600 in a given year in non employee compensation. Most typically, this requirement applies to services rendered by an independent contractor over the course of a tax year.

Keep accurate payment records throughout the year to make end-of-year calculations simple.

Collect Form W-9 from each person who meets the $600 requirement. This form requests the identification number (frequently a Social-Security number) from the independent contractor. You will need this information to fill out the 1099-MISC.

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Request a blank 1099-MISC from the Internal Revenue Service (IRS)

Fill in your contact information under "Payer," including your LLC's employer identification number (if a multimember LLC) or your Social Security number (if a single-member LLC).

Fill in the contact information of the independent contractor under "Recipient," including the identification number she reported to you on the W-9.

Fill in the total amount paid to the independent contractor over the entire year under Box 7, "Non employee Compensation."

Fill in the total amount of income tax that you withheld from these payments in Box 4. For most LLCs, this number will be $0.

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Request a blank Form 1096 from the IRS or download a copy with instructions from IRS.gov. This form is your cover sheet for all 1099-MISC forms.

Separate copies of 1099-MISC forms according to their destination.

Submit one copy of all 1099-MISC forms with the 1096 cover sheet to the IRS according to your assigned address in the instructions.

Mail a copy of 1099-MISC form to each independent contractor for his own tax records.

Submit a copy of MISC-1099 to the state department of revenue for the state where your independent contractor resides.

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How to Report Form 1099 Q

Internal Revenue Service Form 1099-Q should be delivered to you if you received education benefits during a tax year--either from a Coverdell education savings account or another qualified tuition program. (You may also receive a 1099-Q if you are the beneficiary of an estate.) The form will record exactly how much you received in benefits. Have a question? Get an answer from tax advisor now!

Instructions

IRS Form 2290

1 - Calculate how much money you spent on education in the year under review. This includes tuition, textbooks, room and board and related fees.

2 - Compare the amount from Step 1 to the distribution you received, which will be recorded in Box 1 of your 1099-Q. A portion of that amount is recorded in Box 2 as "earnings" from your distribution. Depending on how much you spent on education, some or all of those earnings may be taxable.

IRS Form 1099

3 - Record a portion of your Box 2 earnings as "Other Income" on line 21 of your tax return. The percentage of these earnings that must be reported and taxed is equal to the percentage of your Box 1 distribution that you DIDN'T use for education expenses. For example: if Box 1 shows a distribution of $10,000, Box 2 earnings of $2,000, and your education expenses were $5,000, then 50 percent of your distribution went unused. You must therefore report 50 percent of your Box 2 earnings--$1,000--on line 21. If, however, your expenses were $8,000, then only 20 percent of your distribution went unused, and you should report $400. Finally, if your education expenses were zero, you must report the full amount in Box 2.
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4 - Keep the 1099-Q for your records.

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How to Fill Out IRS Form 1099-B

IRS Form 1099-B is sent to those taxpayers who received proceeds from broker and barter exchange transactions. This article is written from the point of view of the entity filling out the 1099-B, not the person receiving it. Have a question? Get an answer from tax advisor now!

Instructions

1 - Call (800) TAX-FORM or visit the IRS online form ordering website (see resources below) to obtain acceptable copies of Form 1099-B to send to recipients. Although Form 1099-B is available for viewing online, the e-version of the form is unacceptable to send to taxpayers or the Internal Revenue Service.

2 - Check the "Void" or "Corrected" box at the top of the 1099 form if applicable. Enter the Payer's name, street address, city, state, ZIP code and telephone number in the first box. The Payer is the organization or entity that distributed the broker or barter proceeds.

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3 - Enter the Payer's Federal Tax ID number and the recipient's identification number (usually a Social Security number or an EIN) in the two boxes beneath the first box. Below this, list the recipient's name, street address (including apartment number), city, state and ZIP code. Enter the corporation's name from which stock was exchanged or bartered. If applicable, enter the account number that is associated with this transaction. Check the box if the payee has a second tax identification number.

4 - List the trade date of the transaction in Box 1a. In Box 1b, show the CUSIP (Committee on Uniform Security Identification Procedures) number for broker transactions. In Box 2, show any aggregate proceeds from transactions involving bonds, stocks, other debt obligations, commodities or forward contracts. Indicate cash received by the recipient, the fair market value of any property or services the taxpayer received and the fair market value of any scrip or trade credits posted to the recipient's account as a result of a barter exchange. Check the applicable box to indicate if the amount reported to the IRS in Box 2 represents Gross Proceeds or Gross Proceeds minus commissions and option premiums.

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5 - Note any income tax that was withheld as a backup by you, the payer, in Box 4. If the recipient did not provide you with a Tax ID number, you are required to list a 28% withholding of the proceeds paid to the recipient. In Box 5, show the number of shares of the corporation's stock the recipient held which were exchanged during the change in control or substantial change in capital structure. Similarly, Box 6 shows the classes of the corporation's stock that were exchanged during the change in control or substantial change in capital structure.
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6 - Show a brief description of the item or service for which the proceeds or bartering income is being reported in Box 7. In Box 8, indicate the profit or loss realized on regulated futures or foreign currency contracts closed during the current year. Box 9 shows any year-end adjustment to the profit or loss shown in box 8 due to open contracts at the end of the tax year. Box 10 reveals the unrealized profit or loss on open contracts held in the recipient's account as of December 31 of the current year. Based on the amounts in Boxes 8, 9 and 10 figure the aggregate profit or loss and display this number in Box 11. If the recipient cannot take a loss on the amount in Box 2, check off Box 12.

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7 - File Form 1099-B with the IRS; also send a copy to the recipient. Check the IRS official website (see Resources below) for specific instructions as to the filing deadline for Form 1099-B; it changes annually.

How to Report Form 1099-Q on Form 1040

Form 1099-Q is the form for payments from qualified education programs. This form is sent to anyone with qualifying payments from an educational program and must be reported to the Internal Revenue Service on the recipient's individual income-tax return. The information reported on Form 1099Q is considered income, and you report it in the income section of individual federal income-tax returns. Have a question? Get an answer from tax adviser now!

Instructions

How to Get Fast Tax Refund

1 - Obtain a federal income tax Form 1040 from the Internal Revenue Service. Locate and print the form online or pick up a copy at your local post office or tax office. The IRS mails income-tax forms to taxpayers at the beginning of the year as well.

2 - Report the income from Form 1099-Q on your federal form 1040. Only report the amount in box two of your form 1099-Q. Enter it as "Other Income" on line 21 of your Form 1040.

3 - Complete your federal income-tax return with the remainder of your tax information for the tax year. Attach copy A of your 1099-Q to your Form 1040 before sending it to the Internal Revenue Service.

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How to Fill Out IRS Form 1099-INT

IRS Form 1099-INT is sent to those taxpayers who received interest income during the current tax year, such as that from a savings account. This article is written from the point of view of the entity filling out the 1099-INT, not the person receiving it. Have a question? Get an answer from tax advisor now!

Instructions

1 - Call (800) TAX-FORM or visit the IRS online form ordering website (see resources below) to obtain acceptable copies of Form 1099-INT to send to recipients. Although Form 1099-INT is available for viewing online, the e-version of the form is unacceptable to send to the Internal Revenue Service or tax recipients.

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2 - Check the "Void" or "Corrected" box at the top of the 1099 form if applicable. Enter the Payer's name, street address, city, state, ZIP code and telephone number in the first box. The Payer is the organization or entity that paid out the interest income.

3 - Enter the Payer's Federal Tax ID number and the recipient's ID number (usually a Social Security number or an EIN) in the two boxes beneath the first box. Below this, list the recipient's name, street address (including apartment number), city, state and ZIP code. If applicable, enter the account number that is associated with this interest payment. Check the box if the payee has a second tax identification number. Note the payer's RTN (routing transit number) if applicable.
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4 - List any taxable interest paid to the recipient during the year including any credits from Gulf tax bonds or clean renewable energy bonds in Box 1. In Box 2, indicate any penalty or lost interest because of early withdrawal of funds. In Box 3 show any taxable interest received for United States Savings Bonds, Treasury bonds, Treasury bills or Treasury notes.

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5 - Note any income tax that was withheld as a backup by you, the payer, in Box 4. If the recipient did not provide you with a Tax ID number, you are required to list a 28% withholding of the interest paid to the recipient. In Box 5, enter the taxpayer's share of investment expenses from a single-class REMIC (real estate mortgage investment conduit).

6 - Report any foreign tax paid by the payee in Box 6; list the applicable foreign entity in Box 7. In Box 8, show any tax-exempt interest, including exempt-interest dividends from a regulated investment company, paid to the payee. Indicate the applicable interest that is subject to the alternative minimum tax (AMT) in Box 9.

7 - File Form 1099-INT with the IRS; also send a copy to the recipient. Check the IRS official website (see Resources below) for specific instructions as to the filing deadline for Form 1099-INT; it changes annually.

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IRS Form 8332 Instructions

If you are a custodial parent and want your former spouse or another guardian to claim your child on his tax return, you will need to complete Internal Revenue Service Form 8332. Also, if you previously completed this form and you now want to begin claiming your child again, you will need to complete a new Form 8332. If you do not complete this form before tax returns are filed, you can delay the noncustodial parents, and your own, tax return. Have a question? Get an answer from a lawyer now!

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Instructions

1 - Read the requirements to file Form 8332 to determine if you can file the form. To be a qualifying child of the noncustodial parent, the child must have received more than 50 percent of his financial support from one or both parents and have been in the custody of one of the parents for more than half the year.

2 - Complete part 1 of the form if you want to release your right to claim your child as a dependent for one year. Fill in the name of your child beside the statement “I agree not to claim an exemption for.” Fill in the tax year. Sign in the signature location. Fill in your Social Security number on the document where it states “Custodial parent’s SSN.” Date the document.

3 - Complete part 2 of the document if you will be releasing your claim for multiple years. Fill in the name of your child, your Social Security number and the date, then sign the form. Write the specific years you agree to release your claim on the blank line following the words “For the tax year(s).” For example, write 2012-2014. You may also write the phrase “For all future years” if you do not plan on claiming your child on your tax return again.

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4 - Complete part 3 of the document if you want to revoke your previous agreement not to claim your child. Fill in your child’s name, your Social Security number and the date, then sign the document. Write the specific years you want to revoke your previous agreement or the phrase “For all future years.”

5 - Attach a copy of your divorce decree or other agreement in lieu of Form 8332 if the decree is dated 2008 or earlier. The document should state that the noncustodial parent has the right to claim his child as a dependent; the custodial parent has no intent to claim the child as a dependent and specify the number of years this agreement is in effect. Include the cover page of your decree, being sure to list the custodial parent’s Social Security number, the pages that dictate the agreement and the signature page.

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6 - Attach Form 8332 with your other tax forms. Submit to the Internal Revenue Service before April 15.