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When working as a freelancer or independent contractor, clients are required to provide you with a 1099 form at the end of the calendar year. The form is required when total compensation exceeds $600 during each tax year. A copy of the form is submitted to the IRS to help track miscellaneous income. Although there are variations of the 1099 to show interest and other types of payments, Form 1099-MISC is used to report payments to independent contractors.
On a 1099 MISC Form, the income earned will be noted, but there will not be any deductions for federal and state income taxes, nor will any deferred compensation, social security, or medical deductions be taken. Since the 1099 recipient is not an employee of the business, the business is obligated only to tender the income to the contractors any deductions. This 1099 income is also reported to the Internal Revenue Service so it has the opportunity to track income from freelance workers. The freelancer will be obligated to make his or her own tax deductions and forward such payments to the IRS.
Deadline to electronically file your 1099 form is March 31, 2011. As Per IRS regulations any person/s required to file 250 returns or more must file those returns electronically. Others with less than 250 returns may also choose to electronically file their returns. Filers whom fail to file a correct information return by the deadline may be subject to a penalty. Penalties vary and are based on the date you file your correct return.
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