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1099 Question: What Type of Income do I Need to Report?

December 22, 2014

Businesses must pay attention to IRS Form 1099-MISC which details required disclosure of miscellaneous income like cleaning and land maintenance services.

For U.S. business owners hiring service providers and independent contractors, the IRS requires that you complete a special tax form called a Form 1099 the first month of the year. For small businesses reporting miscellaneous income paid during the year, the Form 1099-MISC is used.

What type of income do I need to report?

On Form 1099-MISC, small businesses need to report payments to independent workers.

Who is classified as an independent worker?

An independent worker is a self-employed person or small service firm hired as an independent contractor. This includes:

  • Web developers
  • Graphic designers
  • Cleaning services
  • Land maintenance services
  • Freelance writers

As a rule, any person to whom your company has paid the following amounts during the year should receive a Form 1099-MISC:

  • A minimum of $10 in royalties or broker payments in place of dividends or tax- exempt interest.
  • A minimum of $600 in rents, services from someone other than an employee, prizes, awards, medial payments, crop insurance proceeds, cash payments for fish, fishing boat proceeds, or payments to an attorney.

What types of payments are not required to be reported?

Certain instances do not require disclosure on Form 1099-MISC. This includes:

  • Payments to employees. Employment income is instead reported on Form W-2.
  • Payments to corporations.
  • Payments for merchandise, freight, telephone, storage, etc.
  • Travel allowances for employees on business trips.
  • Life insurance protection costs.

Contact any member of our Tax Services Team if you have any additional questions regarding Form 1099.

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