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Thread: It's that time of year again. Clients sending me W9 forms.

  1. #21
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    A 1099 is for any service that is performed for a business over $600. You don't have to be an IC. It is used for services, rent, prizes, awards and many other things. I get them regularly from my larger clients and I'm clearly not an IC.

    There is really no advantage for them to call you an IC over a purchase. Both would be deducted from total income to determine profit. The result is the same.

    As for reporting it as income, you really should do that. Not reporting it would be fraud and you posted your intentions on a public website. In addition, the company can still file the 1099 without your SSN and stated you refused to provide the information. The IRS would then be unhappy with both you and them. It is definitely something that could provoke an audit or worse. At best you will only get an automatic letter stating you didn't file it with a bill.

    Also, a 1099 goes under revenue for your business, not wages.

    If you don't believe me, talk to an accountant.
    Last edited by nealrm; 01-19-2018 at 06:50 PM.
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    A 1099 goes on the schedule C for your business. It is part of the total revenue. They do not go under salary. So the expenses and such would be remove before determine profit. It is the profit that is taxed.
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    Rockin' the Casbah Array Harold Mansfield's Avatar
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    Quote Originally Posted by nealrm View Post
    A 1099 goes on the schedule C for your business. It is part of the total revenue. They do not go under salary. So the expenses and such would be remove before determine profit. It is the profit that is taxed.
    So if they report the $500 as salary paid to me as an independent contractor, and I don't report that as a separate income, but have listed the sale of the service....you're saying there's no problem with the 2 different ways we are reporting this payment?

    They're reporting it as salary paid to me, I'm reporting it as a product sold.

    No issues?

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    The 1099 only reports they purchased a service from you. It is used for both for the self employed providing services and the IC. The amount should be in box 7 "nonemployee compensation". The amount on the 1099 just gets included in with the gross receipts on the schedule C (Line 1 under income). Here is a link from the IRS.

    https://www.irs.gov/faqs/interest-di...elf-employed-3

    If you are using software to do your taxes, it should ask you about 1099 income. I use turbotax. I put the 1099 in, and remove that amount of income from gross receipts. The software will combine the 2 into gross receipts and see that it gets reported correctly. So you end up reporting the same gross receipts, but this way those 1099 are shown as being included in that revenue.
    Last edited by nealrm; 01-19-2018 at 10:42 PM.
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    FWIW, the organization I work for in my "day-job" requests a W-9 from from every single vendor that they deal with, before they will deal with them -- doesn't matter whether the vendor is some huge multi-national corporation with a million-dollar contract, or a guest speaker who is going to get a $150 honorarium.

    ETA -- I second what Neal posted. Any business that pays out $600 or more for services to a non-incorporated service provider is supposed to report those payments on a 1099-MISC. If the service provider is incorporated, then they don't have to file the 1099-MISC, but they might still request a W-9 in order to verify the legal business form of the service provider...
    Last edited by tallen; 01-21-2018 at 02:21 AM.

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    Rockin' the Casbah Array Harold Mansfield's Avatar
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    Quote Originally Posted by tallen View Post
    FWIW, the organization I work for in my "day-job" requests a W-9 from from every single vendor that they deal with, before they will deal with them --
    The key word there is "before". Not months later when it's tax time. And what they purchased didn't amount to $600.

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    We get requests for W9 regularly. I believe it is because it has all pertinent information on it so they can set you up in their system for payment.

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    Quote Originally Posted by Harold Mansfield View Post
    A 1099 is for Independent Contractors.
    Harold, that may be your impression but it is not correct. A business is required to report any payment for service of $600 or more unless it falls within an exception. One exception is for businesses that are corporations (including an LLC taxed as a corporation) which is why you don't have to send one to your hosting company. If a business pays you more than $600 and doesn't send you a 1099-MISC when it should, it is liable for penalties.

    Likewise if a business has properly requested a W-9 from you and you refuse to supply the information, you are violating the law. That requirement is in section 6109 of the Internal Revenue Code and the related Treasury Regulations. See I.R.C. § 6109(a)(2), (3); see also Treas. Reg. § 301.6109-1(b)(1).

    However, you mention getting paid $499. That is under the threshold of $600 and that particular business has no reason to send you a 1099-MISC.

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    Quote Originally Posted by Business Attorney View Post
    Harold, that may be your impression but it is not correct. A business is required to report any payment for service of $600 or more unless it falls within an exception. One exception is for businesses that are corporations (including an LLC taxed as a corporation) which is why you don't have to send one to your hosting company. If a business pays you more than $600 and doesn't send you a 1099-MISC when it should, it is liable for penalties.

    Likewise if a business has properly requested a W-9 from you and you refuse to supply the information, you are violating the law. That requirement is in section 6109 of the Internal Revenue Code and the related Treasury Regulations. See I.R.C. § 6109(a)(2), (3); see also Treas. Reg. § 301.6109-1(b)(1).

    However, you mention getting paid $499. That is under the threshold of $600 and that particular business has no reason to send you a 1099-MISC.
    Thanks David, that clears it up nicely. Much appreciated.

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