Post No. 27: 1099-MISC
Form
This form is used when the person works as an independent
contractor or Self-Employee. It is the way we use to report income and pay
taxes in the United States
This form is used to report miscellaneous income (sometimes
called “non employee income”) to the IRS.
The term ‘non employee” to include anyone who provides services to another individual or business. It is a broad category, including freelancers, private contractors (like maintenance services), and outsourcing companies. The deadline for filing 1099-MISC forms and 1096 transmittal forms with the IRS is January 31, 2018. There are no extensions allowed for this deadline.
If you paid $600 or more to a non-employee or $10 more
royalties during the year, you must send that person a 1099-MISC showing the total
amount you paid for that year.
In addition to the minimum monetary amount, the 1099-MISC
form is used to record payments to non-employees, including:
Income
earned by an independent contractor (individual in business who provides
services to another individual or business) but not an employee (employees that
are paid as salaried or hourly and may be subject to overtime. Employees are
taxed on their income [they receive a W-2 form showing their annual income],
and they are also withhold federal and state income taxes and FICA taxes
(Social Security and Medicare taxes paid by individuals and employers. FICA
taxes are called payroll taxes because they are based on the amounts paid to
employees (For the Social Security component of FICA the employer will collect
6.2% of the first $128,400 of the work earnings as withhold. The Medicare component
is smaller and will include 1.45% of the total wages)
Fees,
commissions (to salespeople who are not employees), rents, or royalties paid
Payment
for prizes, awards, or legal services
Excess
golden parachute payments
Medical
and health care payments
Before a non-employee can receive a 1099-MISC, they must
complete a W-9 form. This form includes name and address and, most important,
the recipient’s tax identification number.
Self-employment taxes combine the employee and employer
portions of the Social Security and Medicare payroll taxes that employers
withhold from their employee’s pay. The total self-employment tax rate of 15.3%
consists of the following:
6.2%
that would typically get withheld from employee pay for Social Security.
1.45%
that would typically get withheld from employee pay for Medicare.
6.2%
for the required employer contribution to Social Security
1.45%
for the required employer contribution to Medicare.
In other words, self-employment tax is usually roughly twice
what you’d see if you were an employee. As a self-employed person, you’re
responsible for the employer share of payroll taxes as well as the employee
share.
There is a twist to keep in mind. Self- employment tax gets
charged on your business profit, but the IRS lets you count the employer half
of the self-employment tas, or 7.65%, as a business deduction for purposes of
calculating the tax.
2018 Instructions for Form 1099-MISC. PDF:
Here’s What You’ll Pay in FICA Tax in 2018:
Self-Employment
Tax in 2018: Here’s How Much You’ll Have to Pay:
Who Must
Receive Form 1099-MISC:
How to
Prepare 1099-MISC Forms- Step by Step:
How to fill
out an IRS 1099-MISC Tax Form. Time: 10:24:
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