As per the rules and regulations of the Internal Revenue Services (IRS), there are a number of forms that individuals and business owners need to file for payments made and received during the course of their employment and business. The tax preparation of individual’s personal income in San Diego is less cumbersome as compared to the tax preparation of a large or small business. The complexity of tax preparation in a business organization is more due to the presence of a number of forms that they have to fill while making or receiving payments of a particular nature. One of the most common of these is form 1099-MISC.
According to the guidelines of the IRS, form 1099-MISC needs to be filled only when transactions are made in the course of trade or business (individual tax payers need not file this form at all). The IRS requires an individual or small business owner to report certain payments in this particular 1099 form that are made in the form of rent, royalties, prizes and substitute payments etc., apart from reporting all such payments that are deemed fit. The form 1099-MISC is also used to report income by an independent contractor such as freelance writer, etc.
An individual needs to fill form 1099-MISC separately for every person to which any of the following payments is made:
- At least $10 as royalties or brokerage in lieu of dividends
- At least $600 as rent, prizes, awards, medical payments and crop insurance proceeds etc.
- $600 or more paid to an attorney within 1 year
- Fishing boat proceeds
The basic idea is that you may receive a 1099-MISC from several organizations to which you advance your services during the year. Thus, it is very normal for a contractor or freelancer to receive more than 1 copy of such forms by January 31st of every year.
Filing or receiving form 1099-MISC is not just a responsibility or rule imposed on the citizens of America or San Diego; in fact, it offers an opportunity of claiming more tax deductions to an individual. Filing a 1099 form gives the accreditation of a self-employed individual to easily claim the cost of running his business as valid deductions, which may not be possible otherwise. For instance, one can deduct the cost of machinery, raw material, furnishings and other related costs of running the entire business from the revenue generated prior to the final taxable income; this is only possible, however, if one filed the form 1099-MISC.
Though filing form 1099-MISC may seem simple and uncomplicated, there are still chances that contractors and small businesses might encounter some problems while preparing the required form 1099-MISC. Under such circumstances, one can seek professional help from a certified public accountant or tax preparer that have years of experience in preparing and submitting income tax returns and forms. A knowledgeable and experienced CPA or tax preparer acts like an asset for a business or contractor as he tends to minimize the tax dues and doubles up the benefits for the people he works for.
If you need assistance filing form 1099-misc contact Abbo Tax CPA.
