Consultant info?

Question

I asked the question about a consultant being asked for their SS# and was told its the law to 1099 someone who you pay over $600.00. If your attorney or a decorator (for your bussiness) does over $600.00 do you get there ss# and 1099 them?. Or if in ones business you go to the hair salon everyday to look good for your job you are paying over 600.00 in a year do you 1099 them. Or your attorney...you consult with him about your business...do you 1099 him. where is the difference? I don't understand this..

Answer 1

I think you are getting the 1099 form confused with a W-9 form. A 1099 is the form that is turned into the IRS and the provider of the "service" with the total that "service provider" made from your individual company for the year. A 1099 is not what is someone "fills out" with their information, it is a summary of money earned for the IRS. It is basically just a Subcontractor/Independent Contractor's W-2 form.

A W-9 is the paper work that you originally get filled out to file and produce a 1099. An Attorney and a Stylist work for a company/practice. Which pays their own Worker's Compensation and General Liability Insurances. You do not provide the option for any contractor to use your insurance, b/c as an individual you have no need for Work. Comp or General Liability. A W-9 form is basically, permission from the person providing a tax-deductible service to you. This "permission" gives you the ability to use the income you paid them as a deduction on your taxes. So again no, stylist fees and attorney bills are not tax deductible. With a Consultant, the basis lies in "what" you were being consulted about. If it was a business related consultation, then these fees are very well tax deductible.

I would suggest you talk to a CPA. They are not that expensive, Especially considering if you try and deduct / W-9 your Consultant and Stylist there is a very good chance you could be audited. I assure you, you will throw up red flags to the IRS if you try and do this yourself.

Answer 2

I am a little confused by the question. But, basically, if you employ a business to work for you (you hire an accounant, attorney, hairstylist, etc.), that business should have already have filed the necessary paperwork with the IRS to document how much you paid the business. 1099's are generally used when a person recieving money did not filed the needed paperwork with the IRS to report certain income.

For example, say someone sold a home they used to live and made a $50,000.00 profit. On average, most people have not filed the needed paperwork with the IRS to avoid being 1099'ed. The closing agent should issue a 1099 in that case. However, a consultant, attorney, or accountant should be filing the needed paperwork with the IRS to avoid 1099'ing himself on behalf of his clients.

If a consultant you hired asked for your SSN and said he would issue a 1099 TO HIMSELF on your behalf, then I think you have a consultant who is playing games with the IRS code.

Even if you have done nothing wrong, dealing with such a person can get you dragged into court as a witness, wasting days of you time. Avoid such people.

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Answer 3

I think you're overlapping a consultant with business services.
If you go to a beauty salon or an attorney you are dealing with an established business who already has a tax payment system in place - meaning they pay their own taxes on the money they get in because they are an employee of the business. (Attorney is an "employee" of this firm, hairdresser is an "employee" of their salon).

An independent contractor is NOT an employee for the business they are doing work for. You are an independent entity. The company is required to report that they payed you a wage to the IRS so the IRS knows that they need to get money from you, but since you not an actual employee the company is not responsible for witholding the taxes/ FICA etc. So the 1099 is the form you will get at the end of the year that says you earned "X-dollars" from this company - you will not be responsible for all taxes on that money.
You can use your social security number or you can apply for an employee identification number from the IRS (EIN) and use that number.