What is 1099-MISC
This terminology is used in Finance and Taxation. Moreover this taxation type is used in the United Nations for independent contractor or workers. The 1099 refers to a form called Internal Revenue Service (IRS) were in the independent contractor has to state his or her income from any independent business for a particular financial year. A 1099 contractor is not an employee of any business establishment; he or she is a consultant.
When that is an independent contractor files his or her taxes? 1099 contractors who make more than $ 600 per year are issued these forms. Now the question is how taxes are cut from independent contractors? Since an independent contractor is considered as self employed he or she has to withhold his or her Social Security and Medicare taxes. An independent contractor is also eligible for deductions from his or her income as regular taxpayers. A few deductions for 1099 contractor are mentioned below:
Home office costsVehicle costs, if it is used for work related travelComputer, if it is purchased to work from home for generating incomeBusiness related receipts to be saved to claim deductions
A 1099 contractor has an advantage over the regular employees in terms of scheduling his or her work. He or she has neither rigid work timings nor working days. Of course target will be set for them also. On the other hand the greatest disadvantage would be he or she does not get Time off with pay whether it is illness or leisure leave.
Now let us see some legal implications that a 1099 contractor has to undergo. First of all these implications are purely based on the contract terms entered between the 1099 contractor and his or her client, hence they can terminate the contract at the client’s will with out any notice. Secondly the 1099 contractor has to take care of his or her own retirement and health insurance benefits. Third but very important one is this kind of contractor is not covered by Minimum Wages Act. Finally its time which matters, the more time he or she takes to accomplish a job, the minimum earnings will fall sharply.
Below are few specific 1099 MISC. forms with different alphabet and their use:
1099 B: Proceeds from broker and barter exchange transactions.1099 DIV: Dividends and Distribution1099G: certain government payments.1099 INT: Interest income1099 MISC: miscellaneous income1099 R: income from annuities, pensions, profit sharing plans.1099 S: proceeds from real estate transactions.
1099 SSA: Social security benefits paid.