Filing an IRS 1099-MISC for contractor wages

[aja8888]

It's been a long time since I closed my Sub S Corp and need some fresh information.

During the last few years, I have been consulting part time for an old client. Earlier this year, I did a job for that client that was interrupted by a family matter and I had to hire another person to do a piece of the work on my behalf as my contractor. Because of this, I have to provide my contractor a 1099 for the wages I paid him. Now it's been a long time since I filed "employer 1099's" and all I can find online is the form(s) need to be filed via paper form if less than a XXX number of forms is filed by an employer (wage payer).

Is this correct? I can't believe in this day and age that the IRS wants "special paper" 1099 & 1096 forms from a small employer.

Is there a software package that would allow me to file (with the IRS or the SSA) one 1099 and 1096 electronically? Turbo Tax Business maybe? Something else?

I'm hoping you real estate Guru's have to file these and maybe you can chime in here with some advice.

Thanks.

 

[Senator]

It's been a long time since I closed my Sub S Corp and need some fresh information.

During the last few years, I have been consulting part time for an old client. Earlier this year, I did a job for that client that was interrupted by a family matter and I had to hire another person to do a piece of the work on my behalf as my contractor. Because of this, I have to provide my contractor a 1099 for the wages I paid him. Now it's been a long time since I filed "employer 1099's" and all I can find online is the form(s) need to be filed via paper form if less than a XXX number of forms is filed by an employer (wage payer).

Is this correct? I can't believe in this day and age that the IRS wants "special paper" 1099 & 1096 forms from a small employer.

Is there a software package that would allow me to file one 1099 and 1096 electronically? Turbo Tax Business maybe? Something else?

I'm hoping you real estate Guru's have to file these and maybe you can chime in here with some advice.

Thanks.

Turbo Tax will print one for you.

 

[aja8888]

Turbo Tax will print one for you.

So they still have to be mailed in with the summary form, correct?

 

[Senator]

So they still have to be mailed in with the summary form, correct?

I am not sure, I have never used the feature...

 

[socca]

I use Intuit's website to e-file 1099s. No need to file a 1096. No messing with trying to print out and mail forms. The cost is reasonable. I don't have a link available but google should find it for you.

 

[rodi]

I do a 1096/1099 for our piano teacher. It's well over the annual cap. I wasn't bothering till about 5-6 years ago she complained she didn't have enough income to qualify for the deductions she could take... I told her I'd be happy to report her income. As far as I know she only has one other family doing this... and the college she teaches at part time.

I was treasurer for a 501(c)3 that hired contractors to teach music, art, poetry, latin, gym at the local school. (Budget cuts had reduced all this stuff.) I filed the 1096 and issued 1099's to all of the contractors.

It's super easy. IRS will send you the forms for free.

 

[aja8888]

I do a 1096/1099 for our piano teacher. It's well over the annual cap. I wasn't bothering till about 5-6 years ago she complained she didn't have enough income to qualify for the deductions she could take... I told her I'd be happy to report her income. As far as I know she only has one other family doing this... and the college she teaches at part time.

I was treasurer for a 501(c)3 that hired contractors to teach music, art, poetry, latin, gym at the local school. (Budget cuts had reduced all this stuff.) I filed the 1096 and issued 1099's to all of the contractors.

It's super easy. IRS will send you the forms for free.

Thanks, I just placed the order for the forms on the IRS website. Can they be handwritten or do I have to find a typewriter?

 

[SheitlQueen]

Thanks, I just placed the order for the forms on the IRS website. Can they be handwritten or do I have to find a typewriter?

I always hand wrote mine.....I just printed everything very neatly.

 

[Luck_Club]

I do a 1096/1099 for our piano teacher. It's well over the annual cap. I wasn't bothering till about 5-6 years ago she complained she didn't have enough income to qualify for the deductions she could take... I told her I'd be happy to report her income. As far as I know she only has one other family doing this... and the college she teaches at part time.

.

It is her responsibility to report all the income even if she doesn't get a 1099. Not reporting income is considering tax evasion by the IRS and is punishable by jail times in addition to fines.

 

[Blue Collar Guy]

It is her responsibility to report all the income even if she doesn't get a 1099. Not reporting income is considering tax evasion by the IRS and is punishable by jail times in addition to fines.

You know , you have a point, I knew guys that did security at many different venues to keep below the $600 1099 must give threshold. It was pointed out they needed to report it even if they didnt get a 1099.

I wonder if most lawn guys report their earnings?

 

[aja8888]

I always hand wrote mine.....I just printed everything very neatly.

Thanks, since I only have one to do, I'll hand print it also.

 

[Luck_Club]

You know , you have a point, I knew guys that did security at many different venues to keep below the $600 1099 must give threshold. It was pointed out they needed to report it even if they didnt get a 1099.

I wonder if most lawn guys report their earnings?

you get 10% of what the govt collects, maybe you should drop a dime.

 

[Blue Collar Guy]

you get 10% of what the govt collects, maybe you should drop a dime.

Lol, yeah , I think I heard that part too, I will let their conscious be their guide.


OTOH, If it was a bigger number I could ask for a 5 % cut too keep my mouth shut.

 

[rodi]

aja888 - I always hand print them - neatly. Also press hard - the copy you keep is the bottom/last copy... so it's unreadable if you don't press hard.

As for my piano teacher... that's between her and the IRS... It honestly hadn't occurred to me to 1099 her until I started filing them for the non profit foundation and realized it was super easy. I suspect most people don't 1099 their yard workers, pool service folks, housecleaners, tutors, piano teachers, etc.... If you use a service (merry maids for example) - they'll be doing taxes for their employees... but if you hire an individual and pay them at time of service.... chances are you owe them a 1099.

 

[Luck_Club]

aja888 - If you use a service (merry maids for example) - they'll be doing taxes for their employees... but if you hire an individual and pay them at time of service.... chances are you owe them a 1099.

Again I beg to disagree the burden falls to the provider of the service to voluntarily comply with tax law.

The difference between employee (requiring a 1099) and independent contractor is control. In the situation of a piano teacher, you have very little control. You can not control fully the time, place, or method by which the piano teacher provides their service. The reason why domestic help becomes fuzzy, is because the time and place are typically negotiated and the buyer of the service has the final say. You can't clean my house from 3-6 AM on a Sunday for example.

A few years back the IRS tried to implement 1099's for 100%, of 100% of companies spend. Business said no way, it would have created a huge bureaucratic nightmare. Think if you as an individual had to produce a 15-20 item form for every vendor you used; every restaurant, gas station, hotel, flea market purchase etc. Think of the filing and management of all those purchases, adding up the annual spend for each vendor etc. Now multiply that by 1000, and you get a sense of the burden it places on business, especially small businesses.

Thankfully our tax system is essentially a voluntary compliance system.

It me up when I have a fireman come to my house to quote some work, while he complains he wont get SS. It me up that do to his lucrative benefits he is able to undercut the other guys by 20%. It really me up when he asks me to make the check out to him personally so he can cheat the system.

The point is you can never legislate morality, people will always find a way to skirt the spirit of the law. The more burdensome the laws become the more as a society we spend more effort on less productive tasks.

 

[gauss]

aja888 - I always hand print them - neatly. Also press hard - the copy you keep is the bottom/last copy... so it's unreadable if you don't press hard.

As for my piano teacher... that's between her and the IRS... It honestly hadn't occurred to me to 1099 her until I started filing them for the non profit foundation and realized it was super easy. I suspect most people don't 1099 their yard workers, pool service folks, housecleaners, tutors, piano teachers, etc.... If you use a service (merry maids for example) - they'll be doing taxes for their employees... but if you hire an individual and pay them at time of service.... chances are you owe them a 1099.

I know that "businesses" are required to file 1099's for their independent contractors etc. For personal expenses, I believe the reporting rules do not apply.

The main exception, however, is for household employees where full blown employee reporting is required.

-gauss

 

[rodi]

I know that "businesses" are required to file 1099's for their independent contractors etc. For personal expenses, I believe the reporting rules do not apply.

The main exception, however, is for household employees where full blown employee reporting is required.

-gauss

There is a little grey area - but not a lot. If you pay someone who isn't your employee more than $600/year - then you need to consider filing the 1099/1096. The rules about whether they are independent or not come down to whether they are using your equipment, performing services at your house, etc.

In the case of our piano teacher it's clear cut. She comes to our house, uses our piano. We have a regular schedule. She's not an LLC or corporation and doesn't invoice us. We do a 1099-misc.

From the IRS website:

File this form for each person to whom you have paid during the year:

at least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest;
at least $600 in:
rents;
services performed by someone who is not your employee;
prizes and awards;
other income payments;
medical and health care payments;
crop insurance proceeds;
cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish;
generally, the cash paid from a notional principal contract to an individual, partnership, or estate;
payments to an attorney; or
any fishing boat proceeds,
In addition, use this form to report that you made direct sales of at least $5,000 of consumer products to a buyer for resale anywhere other than a permanent retail establishment.

https://www.irs.gov/forms-pubs/about-form-1099misc


Will you get caught if you don't... probably not. I agree that it's up to the non-employee to properly report their income... but the way I read the IRS website - as a personal reporter - I need to file for my piano teacher since we pay her several thousand a year.

 

[gauss]

There is a little grey area - but not a lot. If you pay someone who isn't your employee more than $600/year - then you need to consider filing the 1099/1096. The rules about whether they are independent or not come down to whether they are using your equipment, performing services at your house, etc.

In the case of our piano teacher it's clear cut. She comes to our house, uses our piano. We have a regular schedule. She's not an LLC or corporation and doesn't invoice us. We do a 1099-misc.

.

Hi Rodi,

Clarifying and standing by my post above:

You shouldn't be using 1099-misc to report payments to an employee. Your description above seems to support the fact that she is indeed an employee and not a contractor. Box 7 on 1099-Misc is for nonemployee compensation

On the other hand, if the teacher is not an employee, then for nonemployee/contractors 1099-Misc is not required for personal payments (only business) payments. If you are not running a for-profit piano school in your house or any other related business activity then the following would apply:

From the IRS 1099-Misc instructions on IRS.gov

Trade or business reporting only. Report on Form 1099-MISC only when payments are made in the course of your trade or business. Personal payments are not reportable. You are engaged in a trade or business if you operate for gain or profit. However, nonprofit organizations are considered to be engaged in a trade or business and are subject to these reporting requirements.

Pub 926 (Household Employer's Tax Guide) gives further details on determining if a service provider is an employee or not and how to properly report it if they are indeed an employee.

You may wish to spend some time with this in that your language above seems to suggest that you consider her an employee vs an independent contractor.

The best solution may be for your instructor to form an LLC if she is conducting these lessons for other individuals beside yourself. This would tend to clarify that she is indeed not an employee and relieve you of the full employer reporting/tax payment burden that exists on the federal and state level.

-gauss

p.s. I am not trying to "stir the pot" on this, but as someone who has started a new business for the first time last year, I spent significant time recently researching tax law to support my positions on my return.

 

[socca]

... but if you hire an individual and pay them at time of service.... chances are you owe them a 1099.

This isn't my understanding, although I'm not an expert.

I you hire an independent contractor, a 1099 isn't due. However, if your business (including a sole proprietorship) hires the independent contractor, a 1099 is due. It's easy to get confused here.

 

[gauss]

I found this document at ssa.gov that states that music teachers are explicitly excluded as being considered domestic employees for Social Security purposes.

The following are not considered domestic employment for Social Security coverage purposes.

Employment in intellectual, cultural or scientific pursuits, hobbies, recreation, and positions as tutors, librarians, music teachers, secretaries, or bookbinders; or
Employment needing specialized skills or training, such as a carpenter, painter, electrician, or plumber.

This seems consistent that music teachers do not show up in any google search for "nanny tax" as opposed to the other household employee professions.

Summarizing, if the music teacher is not your employee and your payment is not in conjunction with your trade/business, then no 1099-Misc reporting is required on your part.


-gauss