How to Report 1099 Income
How to Report 1099 Income
With the increase in bloggers, affiliate marketers, eBay sellers and other online business owners, the topic of reporting miscellaneous income and 1099 forms has been coming up a lot lately.
While most people are aware they must report wages, salaries, interest, dividends, tips and commissions as income on their tax returns, many don’t realize that they must also report other income, such as:
cash earned from side jobs,
barter exchanges of goods or services,
awards, prizes, contest winnings and
Basically, you have to report all income from any source (and any country) unless it is explicitly exempt under the U.S. tax code.
That means if you earn money from ads on your blog, selling items on eBay, selling products for a commission, or providing a service to another person (even if that service is all done via the Internet), then you must report that income.
If you work as an independent contractor and earn $600 or more (from one company or individual), you should receive a Form 1099-MISC reporting your income. Even if you don’t receive a Form 1099, your income is still reportable.
It is a common misconception that if a taxpayer does not receive a Form 1099-MISC or if the income is under $600 per payer, the income is not taxable. There is no minimum amount that a taxpayer may exclude from gross income.
Independent contractors must report all income as taxable, even if it is less than $600. Even if the client does not issue a Form 1099-MISC, the income, whatever the amount, is still reportable by the taxpayer.
The good news is that as an independent contractor, or as a self employed business owner, you get to deduct ordinary and reasonable business expenses against your income.
To report your income and expenses from your online business, use Schedule C: Profit or Loss From Business, which is then attached to your Form 1040 (your personal tax return). You must also complete Schedule SE to calculate your self employment taxes if your net profits from your business exceed $400 for the year.
As a self employed person you are responsible for self employment taxes on top of your regular tax for your net profits. Since the SE tax is 15.3%, this can add up quickly.
We hope you found this article about “How to Report 1099 Income” helpful. If you have questions or need expert tax or family office advice that’s refreshingly objective (we never sell investments), please contact us or visit our Family office page or website www.GROCO.com.
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