One of the most used tax forms for self employed folks and also used mainly by sole proprietors to report profits from the services rendered to other clients it the Form 1099-MISC. You should be given by a business or client a 1099-MISC tax form in the event that you have worked for them as a freelance or a sole proprietor and the services has amounted to 600 dollars or maybe more.
After you get the 1099-MISC, you have to review the box number 7 or “non employment compensation”. This is basically where your income is recorded from that business. The IRS is going to get the exact same copy of it and thus, you must be certain that the report made on this income on Schedule C is correct. For this reason, the 1099-MISC form has the same function as the W-2 in a way that it reports your income from this source to IRS. And even if you don’t receive your form 1099-MISC, you’re still required to report your income when filing for tax return.
If you have earned less than 600 dollars yearly from the income source, then you must still report it. Less than this amount may seem to be that the business you did the work for does not have to send you a 1099-MISC but still, it’s your responsibility to report your earnings.
Now if for example that there is inaccurate income reported on 1099-MISC, then it is critical to do a follow up on the issuing business and they have to send you the fixed form 1099-MISC and to the IRS. Under these situations, you must wait until you get the correct form prior to filing your income tax return. If for example that your Schedule C total as well as tally of all your 1099 forms don’t match, then the IRS is going to reach out to you and ask for an explanation.
If you receive a 1099-MISC form after you filed the income tax, you don’t have to do anything if you have reported the income as part of Schedule C earnings. Say for instance that you have not reported your income, you will then need to send an amended return and incorporate the income that it states in 1099-MISC form. Well most likely, this will lead to owing bigger taxes and possibly, with interests and penalties if the amended return is acquired after April 15 by the IRS.
Make sure to do your best in keeping the records accurate throughout the course of the year and report all earnings to IRS when you filed the return.