Entrepreneurs: How to Deal with Your 1099's
Follow Max as he gets hired.
Welcome, Max!
Thank you! I won’t let you down!
Max will sign a W9 before he works
Max works hard as an indy contractor and makes a lot of money.
At the end of the year, the business owner will process the 1099’s and send them to the IRS.
It could be a 1009-Misc — Normally for regular contractors like bookkeepers, plumbers, graphic artists, etc.
It could be a 1099-K — Usually for drivers like Uber and Lyft. Or people who buy and sell online like Etsy, eBay, and Amazon you will get a 1099-K from these 3rd parties.
Or it could even be a 1099-NEC — This is the new kid on the block. Lawyers and other professional corporations are now supposed to get a 1099-NEC and they won’t like it!
No matter which one the IRS will take any of them, but the owner should file them correctly.
Max then files his taxes.
To recap the process,
Max fills out a W9 at the start of the project.
If he earns over $600 or more at the end of the year Max will receive 1099.
If Max keeps his clients happy he will make more money!
The business owner will send a form to the IRS telling them about the payment to Max and the records better match!
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Hey Ladies and Gents,
There is a lot of activity around the 1099’s.
Yes, it’s August, but tax extensions are due soon so you might as well make sure you have all your 1099’s gathered together in a heap on top of your kitchen table.
First of all, we have two situations happenin’.
- Entrepreneurs (consultants, contractors, etc) who’ll receive a 1099.
- and Entrepreneurs who will give out 1099's
When I say entrepreneur (TRE) I mean a business owner who files taxes. Some people call themselves entrepreneurs but have not generated any money thus no taxes.
If you are a TRE that gives out 1099’s, the 1099's are always to be mailed out by due January 31st of any year. So if you haven’t sent them out you’re late. I could tell you more but this is a public space! Haha!
This article is for TRE’s that receive 1099 (s) and filed a tax extension.
If you are an EnTREpreneur you will receive one of the following 1099’s if you earned over $600.
1099-MISC
Most TRE’s will get a 1099-MISC like consultants, fitness instructors, commission-based people, most sole proprietors, and now LLC’s (hopefully LLC’s are not enforced)
1099-K
This is a different animal and you will only get one if the following applies
- You had gross online payments that exceed $20,000, AND more than 200 such transactions. The keyword here is AND.
You will likely receive a 1099-K if you are an online merchant, drivers like Uber, Airbnb hosts, Peer space rentals etc.
Even if you don’t meet the threshold you should check your 3rd party account to be sure they didn’t give you a 1099-K.
3rd Parties are like Square, PayPal, Stripe, Zelle, Ebay, Etsy, Amazon, and a few many others.
1099-NEC
This is basically a new form. Uncle Sam wants to make sure he gets the income from professionals including corporations for any amount over $600.
If you are an employee Uncle Sam already got his tax money! So no worries!
Professional service fees, such as fees to attorneys (including corporations this is huge), accountants, architects, contractors, engineers, etc. Obviously, there is more to this but if you are a professional don’t get mad at me the messenger when you get a 1099-NEC late and you didn’t report it on your taxes!
These pros could also get a 1099-MISC if the bookkeeper doesn’t know about 1099-NEC. No worries the Taxman will take either and will thank you for being a faithful gatekeeper!
If you are an S. Corp or C Corp Entrepreneur you probably have never received a 1099, but that’s about to change. Whether it’s enforced is another story.
I got a workbook coming at the end of August that covers all the 1099’s in detail and is for Entrepreneurs who give 1099’s and Entrepreneurs that receive 1099’s and don’t understand the process. The workbook is called the 1099 Slayer and is basically a hard copy that you keep near you like gold or crypto!
Thanks for reading!
