Steps to using the 1099 tax forms

Written By Gary Spirer Published March 28th, 2010

Do you use freelancers to help you with small projects rather than hire an employee? If so, then you will need to understand how 1099s work. Here’s how.

Step 1 Determine whether you need to file a 1099 for freelance work
When you hire someone for freelance you do not need to worry about their taxes. That is, until you pay them more than $600 within a calendar year. Once your freelance “non-employee” is paid more than $600 by you, you will need to file a 1099 for this freelancer.

Step 2 Know how much you pay out to freelancers
It is very easy to take care of your 1099s, but during the year you will want to make sure of the amounts of money you pay your various freelancers. During the year use a program like QuickBooks or hire a bookkeeper to help you keep track of the amount of money you’re paying each of your freelance workers. If you use a program like QuickBooks, the amounts are tracked.

Step 3 Report what you pay
Before tax time comes around – and generally you will want to do this right at the beginning of the year – you’ll need to report what you have paid each non-employee freelance worker. You report this amount to the IRS and you also send the form to the freelance worker so that he or she can use it when completing their taxes. These forms are called 1099s and you can do them “by hand” or on the computer. You’ll need to have the forms sent to you – go online to find them – or you can purchase them in stores like Office Max or Office Depot. They come in packs and generally have instructions and envelopes for mailing them out to your freelance workers.

It’s that simple. Remember, freelancers can save time and money, but their work must be reported to the Internal Revenue Service if over $600 in a given calendar year. Please visit for more great business advice.


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