Let's say I started a website to pay members for things. If I put a limit on $600 per member per year, how would all this work with the IRS? I know it's if it greater than $600 you (the members) have to report it to the IRS, and thus I'd have to have a form for them to fill out, etc. Is this a big pain to do or something easy? I assume it'd be hard since I'd have to get their SSID, so nevermind that. (Yes, I just answered my own question). Anyway, how would all this work out legally? Would $600 be non-taxable/reportable or would it technically have to be $599? I don't have a site like this (and actually really never will) but it's good to know these type things. Thanks.
Hope this info helps some.... Form 1099 is a form promulgated by the Internal Revenue Service (IRS) and is used in the United States income tax system to prepare and file an information return to report various types of income other than wages, salaries, and tips (for which Social Security Administration Form W-2 is used instead). The term information return is used in contrast to the term tax return although the latter term is sometimes used colloquially to describe both kinds of returns. Each payer must complete a 1099 for each covered transaction. Three copies are made: one for the payer, one for the payee, and one for the IRS. A notable use of Form 1099 is to report amounts paid to independent contractors (in IRS terminology, such payments are nonemployee compensation). The ubiquity of the form has also led to use of the phrase "1099" to refer to contractors themselves. U.S. tax law requires businesses to submit a Form 1099 for every contractor paid more than $600 for services during a year. This requirement usually does not apply to corporations receiving payments. Form 1099 is also used to report interest (1099-INT), dividends (1099-DIV), sales proceeds (1099-B) and some kinds of miscellaneous income (1099-MISC). Blank Form 1099s and the related instructions to the forms can be downloaded from the IRS website.[5] Payees use the information provided on the 1099 forms to help them complete their own tax returns. In order to save paper, payers can give payees one single Combined Form 1099 that lists all of their 1099 transactions for the entire year. Taxpayers are usually not required to attach Form 1099s to their own Federal income tax returns unless the Form 1099 includes a report for Federal income tax withheld by the payer from the related payments. The law provides various dollar amounts under which no Form 1099 reporting requirement is imposed. For some Form 1099s, for example, no filing is required for payees who receive less than $600 from the payer during the applicable year. The issuance or non-issuance of a Form 1099 in a particular case is not determinative of the tax treatment required of the payee. Each payee-taxpayer is legally responsible for reporting the correct amount of total income on his or her own Federal income tax return regardless of whether a Form 1099 was filed. In any case, the payee-taxpayer remains responsible for filing an accurate Federal income tax return. Jim
Thanks for the info, and no offensive, but I was looking for more of a 'human' answer as opposed to a copy-paste from a website.
So, I gave you the answer, and you don't like the format? LOL No offense here, but I was wondering why you wanted to know when you said..."I don't have a site like this (and actually really never will) but it's good to know these type things." Jim
Here is a simple answer. They are required to report ALL income earned. In most cases the Payor of commissions and or contract labor are not required to mail the person a 1099 unless the amount is $600 or greater. I am really not sure at what point you are required to collect a TIN form and maintain their fica number in your business records (for sure if you mail them a 1099).
No offense, but the first answer was also a simple answer for anyone who can read and think. I always believe in citing authorities when answering a tax/legal question. I've seen too many "simple answers" to these types of questions on DP that were totally wrong. Jim
Nice work Quintox, reward a thorough and in-depth response to your "just wondering" question with a slap...