Taxes Made Simple

If you make payments in excess of $600 to a person or a business over the course of a year, you must file Form 1099 to report those payments. One copy of the form is sent to the IRS, and another copy is sent to the person to whom you made the payments.

Exceptions:

• Payments made to corporations are generally not required to be reported via Form 1099.
• Payments in exchange for merchandise are not required to be reported via Form 1099.
• Payments made to tax-exempt organizations and payments made to a government (state, city, or Federal) are not required to be reported via Form 1099.

Of course, it's perfectly acceptable to file a Form 1099 even if payments made were less than $600. (In order to simplify their processes, many businesses simply send 1099s to everybody to whom they made payments, regardless of amount.)

Payments to Employees

Wage payments made to employees are not reported on Form 1099. They are reported on Form W-2.

As such, if you receive a 1099 at the end of the year reporting your income from your job, you know that you're being classified as an independent contractor (as opposed to being classified as an employee) for the work that you're doing.

About the Author: Mike Piper is the author of Surprisingly Simple: LLC vs. S-Corp vs. C-Corp Explained in 100 Pages or Less.