How does a 1099 tax form work

how does a 1099 tax form work

When you work for someone and get a 1099, you are considered to be self employed not an employee and the person you work for is not your employer. This. show more When you work for someone and get a 1099, you are considered to be self employed not an employee and the person you work for is not your employer. This means that no taxes will be withheld. You will be responsible for paying your own social security and medicare payments. This is called Self Employment tax.

You can deduct from your income expenses you incur for the generation of that income such as supplies and tools you had to purchase. If you use your car for your business, then you can deduct either the standard mileage rate or actual expenses. If you have a qualifed home office, you can deduct a % of your household expenses (the rules are pretty strict and not everyone can do this.) The expenses you will have vary depending on

what is "ordinary and necessary" for your business.

You will report your income on Sch C or Sch C-EZ and your self employment tax on Sch SE. You will also need to file Form 1040, not 1040A or 1040EZ.

Because no taxes will be withheld, if you expect to owe more than $1,000, you will need to file quarterly tax payments.

Those are the basics. The IRS has rules for determining if a person is a contractor or an employee. There is no choice. Some employers do this to avoid paying the employer portion of social security,medicare, Unemployment tax and worker's compensation. It is illegal if this is the case.

You should also be aware that if you are fired, you cannot collect unemployment because the employer din't pay in. You cannot collect worker's comp either as you are probably not covered by their plan.

Source(s): 16 years experience as tax professional and Enrolled Agent

Mark S · 8 years ago

Source: answers.yahoo.com

Category: Taxes

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