Being independent has its drawbacks, especially when it comes time to pay your taxes as a Baie-Comeau independent contractor. Luckily, there is info and help out there, so that you can make sure Uncle Sam only gets what is coming to him.
A Form 1099 MISC is used to report payments made in the course of a trade or business to another person or business that is not an employee (for example, an independent contractor). The form is required when payments of $10 or more in gross royalties or $600 or more in rents or compensation are paid. The form is provided by the payer to the Internal Revenue Service (IRS) and the person or business that received the payment. You can access Form 1099 MISC and its instructions on the IRS Forms and Publications web page. For details about filing Form 1099 MISC, or for information about required electronic or magnetic media filing, please refer to the IRS's Information Returns Processing web page.
Independent Contractors Versus Employees
It is critical that an employer correctly determine whether the individuals providing services are employees or independent contractors. Employers must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment taxes on wages paid to an employee. The earnings of a person who is working as an independent contractor are subject to Self-employment (SE) taxes. Contractors do not usually have to withhold or pay any taxes on payments to independent contractors. In general, an individual is an independent contractor if the person for whom the services are performed has the right to control or direct only the result of the work, not what will be done or how it will be done. It is critical that the employer correctly determine whether the individuals providing services are employees or independent contractors. For more information, please visit the IRS's Independent Contractor (Self-Employed) or Employee? web page.
If You Are a Misclassified Worker
If an employee incorrectly receives an independent contractor's Form 1099 MISC, it usually means the employer did not withhold the worker's share of Social Security and Medicare taxes.
Beginning in tax year 2007, workers in this situation must use Form 8919 (.PDF document) to report their uncollected Social Security and Medicare taxes. In addition, the worker must meet several criteria indicating he/she was an employee while performing the services. For more information, or to view the criteria, please view the IRS's news release on this subject.
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