Tax Questions - Independant Contractor?

Question

Tax Questions - Independant Contractor?
My bf was very briefly (Very.. like a month and a half) employed somewhere where the employer never asked for their social and never put them on official payroll. However, they would like to file what little income was received (less than $1200, can they just fill out a 1099 and send it in with the rest of their taxes? Is it that simple or is the employer required to do something? If the employer never filled out any forms for them, will they (the employer) be in trouble if the income is filed? Is it just silly to claim such a small amount of income? Better safe than sorry, I think.

Answer 1

Your last sentence says it all. Your b/f must indeed declare all income. Evidently he was not paid on the books. The right thing to do is to report the income. What you do is put the income on Schedule C and deduct any expenses (there may be some or none at all, depending on what he was doing). He must also complete Schedule SE to pay the self-employment tax. That is 15.3% of the bottom line on the Schedule C. So he will want to find as many legitimate expenses as possible. You might want to seek out a local CPA (one who doesn't charge an arm and a leg but who is experienced in tax - not all CPAs are).

Please also consider that the employer may issue a 1099 at the very last minute. I do taxes for numerous businesses who employ contract labor. They never think to ask for social security numbers either, until I ask them in January so I can do the 1099's. The employer has until January 31st to mail the 1099.

Simply reporting the income is not going to get his "employer" in trouble. The IRS is not going to know simply from looking at the return who paid him money.

Finally, is it silly to claim such a small amount of money? No, No, a thousand times NO! Quite apart from doing the right thing, if he is audited, the penalties and interest can easily double the tax by the time the IRS is finished with him.

Answer 2

The company that paid you as an independent contractor must give you a Form 1099 that reflects the money they paid you if it was $600 or more. Many companies will give you one if you were paid less than $600.

You must claim the income on your tax return and pay any taxes (including the 15.3% self employment tax) that are due on that income. There's nothing "silly" about it; it's the law and you ignore it at your own peril.

It's none of your concern what the company that paid you does -- unless you were keeping their books for them.

Answer 3

The employer should be sending the 1099. But you don't need that to file. Just include the amount earned on Schedule C. You can deduct business related expenses as well.

Answer 4

It can be kept separate if you file as married filing separately. If you file a joint return, you have to figure in his income also to make your quarterly estimated payments. Be aware that by filing separately, you will most likely end up paying more total tax between the two of you. It might be worth consulting a CPA to find out if what you'd lose in taxes is worth the aggravation it would save quarterly.

Answer 5

They can file the 1099.