Tax season is typically a stressful time for many people. It’s important not to make any tax mistakes or miss out on extra cash through deductions.
Most people complete their contracted jobs from the comfort of their own home. Because of this, many independent workers started their businesses or began working as freelancers during the pandemic. If you are new to this type of work, it may be more confusing to do your taxes this year.
Get prepared for tax season. Here is what you need to know about 1099-Misc forms as an independent worker.
Who Gets a 1099-Misc Form?
If you are an independent worker and get contracted to do a specific job, you will receive a 1099-Misc form during tax return season. Unlike a W-2 employee, independent contractors have to determine their own payroll taxes. These are paid every quarter.
There are several other differences between being an employee of a company and an independent contractor. Employees receive benefits from their employers. Independent contractors pay for their own insurance policies and retirement plans.
1099-Misc Form Requirements
You must answer “yes” to these questions to receive and file a 1099-Misc form during tax season.
- The payment must be more than $600.
- 1099-Misc forms are used to report money paid for services. It is not used for physical products.
- The services performed must be for business purposes. If the payments were for personal services, you do not need to file a 1099-Misc form.
Independent Worker Deductions
If you are an independent contractor, deduct work-related expenses from your taxes. When filing your 1099-Misc forms, deduct these items:
- Home office
- Car/office maintenance
- Phone bill
- Conferences, classes, and training
- Office supplies
There are so many more deductions that you may qualify for as an independent worker. Talk to a professional tax preparer or accountant to maximize the amount that you will receive back from the government.
More Notes About 1099-Misc Forms
If you are not sure if you need to file a 1099-Misc form or not, you can still file it. There is not a penalty if you do. If you do not file one that is required to, you may be subject to penalties and fees.
Before any payments are made with a new vendor, always get a W-9 form from them. It is vital to do this if there may be a requirement for a 1099-Misc. This saves you during tax-time from vendors that are too busy or unorganized to get you the information.
Maintain Your Bookkeeping Records
Are you considered a freelancer, contractor, or independent worker? You must keep track of your bookkeeping records. Make sure you are getting payments from the vendors you are working with. Record where your money is going so you can save money for taxes, retirement, and insurance.
PL Consulting is your go-to resource for bookkeeping and accounting services. We will help you maintain good records.