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. If for example that you are either a sole-proprietor or self-employed who performed services for another client or business and paid 600 dollars or more for the services rendered, then that business should send you 1099-MISC tax form.
After receiving 1099-MISC, you should review the box number 7 or the “non employment compensation”. This is where your income from that said business will be recorded. 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. In this regard, the 1099-MISC form has the same function as W-2 form in that, it is reporting 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 generated less than 600 dollars annually from income source, you should still report the amount of your income. Earning less than this amount only indicates that the business you rendered your service for doesn’t necessarily require you to send the 1099-MISC but still, it’s your duty to report your earnings.
If the amount of your reported income on form 1099-MISC is inaccurate, then you have to immediately contact the issuing business and they should send you the corrected form 1099-MISC to you 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.
Say that you receive a 1099-MISC form after filing the income tax, you don’t need to do anything if you’ve reported the income as part of the Schedule C earnings. If you fail to report the income, you will need to send the amended return and include all income that it states in your 1099-MISC. 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.