We seem to have a lot of people on this forum who are well-versed in tax issues, so can I ask a question to you all? This is probably an easy question for some of you, but for someone who is now trying to do his own tax return after taking it to HR BLock for years in order to save money, this is confusing to me....
For the first time ever I got a 1099 form this year. My wife did work grading PA elementary standardized school exams last year, and got paid $600. They took no taxes of any kind out of her checks. Then we got a 1099 from them last month. So, I understand that I need to pay federal, state and local taxes on this income, which will occur by default when I add this income in with mine. However, I also realize I need to pay social security and medicare taxes on it as well. From what I can understand from the IRS website, I need to file Form 8919 to do this? I assume she would be considered an 'employee' and not an independent cotnractor in this case?
1099's are almost exclusively issed to independent contractors and for misc income.
1099 Form 1099 is a form promulgated by the Internal Revenue Service (IRS) and is used in the United States income tax system to prepare and file an information return to report various types of income other than wages, salaries, and tips (for which Social Security Administration Form W-2 is used instead). The term information return is used in contrast to the term tax return although the latter term is sometimes used colloquially to describe both kinds of returns.
Each payer must complete a 1099 for each covered transaction. Three copies are made: one for the payer, one for the payee, and one for the IRS.
IRS instructions for form 1099, including a guide to what payments must be reported. Examples of report amounts paid to independent contractors (in IRS terminology, such payments are nonemployee compensation). The ubiquity of the form has also led to use of the phrase "1099" to refer to contractors themselves. U.S. tax law requires businesses to submit a Form 1099 for every contractor paid at least $600 for services during a year. This requirement usually does not apply to corporations receiving payments.
Many businesses and organizations must file thousands of 1099s per year. Thus, payers who file 250 or more Form 1099 reports must file all of them electronically or magnetically[2] with the IRS. The 250 or more requirement applies separately for each type of return and separately for each type of corrected return. Even though filers may submit 249 information returns on paper, the IRS encourages filers to transmit returns electronically. The complexity that arises in filing large volumes of information returns requires many filers to depend on third party information reporting software.
If the less than 250 or more requirement is met, and paper copies are filed, the IRS also requires the payer to submit a copy of form 1096. The 1096 is a summary of information forms being sent to the IRS. You need one 1096 for each type of information form you have issued.
For further information refer to Publication 1220, Specifications for Filing Forms 1098, 1099, 5498 and W-2G Magnetically or Electronically or Publication 1187, Specifications for Filing Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding.[3] The IRS no longer accepts 3 1/2-inch diskettes for filing information returns, and tape cartridges will be phased out after Tax Year 2007. After December 1, 2008, electronic filing will be the ONLY acceptable method to file information returns to the IRS at its computing center in Martinsburg, West Virginia. One can upload 1099 returns to the IRS using their FIRE (Filing Information Returns Electronically) web site at fire.irs.gov.[4] Form 1099 is also used to report interest (1099-INT), dividends (1099-DIV), sales proceeds (1099-B) and some kinds of miscellaneous income (1099-MISC). Blank Form 1099s and the related instructions to the forms can be downloaded from the IRS website.[5]
Payees use the information provided on the 1099 forms to help them complete their own tax returns. In order to save paper, payers can give payees one single Combined Form 1099 that lists all of their 1099 transactions for the entire year. Taxpayers are usually not required to attach Form 1099s to their own Federal income tax returns unless the Form 1099 includes a report for Federal income tax withheld by the payer from the related payments.
There's 1099-Rs, 1099-INTs, and tons of other 1099s. I'm assuming this is a 1099-MISC, and the $600 is reported as non-employee compensation in box 7.
If that's the case, form 8919 is not what you need.
I usually handle 1099-MISC income as self employment income and fill out a schedule C. If she's not claiming any expenses (probably not), you can use Schedule C-EZ. The $600 would go in box 1.
You'll also need a schedule SE. On page 1 of the 1040, in the bottom section, you take out 1/2 of self employment tax. Then on page 2 of the 1040, you'll also need to pay self employment tax, which is essentially medicare and ss.
The sad thing is $600 is so not worth all the time and effort associated with it. Hey Murs, next time tell them to only pay $599, then you can exclude it.
__________________
Stop trying to be what you see. Be what you ought to be.
Man, why does this have to be so freakin' confusing?!
I did get pub 1779, 'are you an employee or independent contractor', and according to it she seems to be an employee up until the part where it says employees get W-2s and ICs get 1099s...
Yes, I believe it was a 1099 misc and the income is in box 7. she's not claiming any expenses because they paid her for mileage (don;t tell me, that means I have to file some other form too then right????).
You know, the IRS is gonna' make me go to HR Block after all just to get this right, and they will charge me as much top do the return as we earened!
Where do you live? Do you have a Jackson Hewitt? If so, take in a $25 off coupon: http://images.revtrax.com/RevTrax/couponPrePrint.jsp?viewType=viewFull&programId=10003825&merchantId=10002387&affiliateId=10001563&subId=0 (Jackson Hewitt is who I work for. But they're all independently owned, so I couldn't tell you if your local one is better than your local H&R.)
Or, what else is involved with your taxes? A couple W2s, that 1099-MISC, and a 1098? I could probably walk you through it (federal anyway).
Well, thank you again for the info. We remembered someone we know who works the same job and I talked to them this am about how they handle the 1099, and they do the same thing that you suggested Mz. So, I think I'll go with that majority opinion and if we're all wrong they'll have to spend a lot of time auditing us all!!
I don;t have any money for them to take even if they did an audit!
Actually, I forget to add that the friend I talked to this morning also said they have them fill out a form before they do the work that declares they are independent conttractos, so that pretty much forces this income to be self-employment and thus down the path that Mz outlined. Either my wife didn;t realize that was what she was filling out, or when I reviewed the paperwork she brought home I didn;t realize the ramifications of that either.
Too bad I'm not a politician, then I could just say shove it, I'm not paying ANY taxes!
So in this situation, where my wife is an independent contractor, is she considered a sole proprietor, or is that a separate designation? The company also sent us a W-9 to send back, and on that form it lumps Individual/Sole Proprietor into the same box.
