The Form 1099-MISC is basically the most used tax form both by sole proprietorship business and self-employed individuals for the services they rendered to clients. You should be given by a business or client a 1099-MISC tax form in the event that you have worked for them as a freelance or a sole proprietor and the services has amounted to 600 dollars or maybe more.
After you get the 1099-MISC, you have to review the box number 7 or “non employment compensation”. This is where your income from that said business will be recorded. You have to be sure to report this income on Schedule C as the IRS has obtained a copy of this form as well. With this in mind, the 1099-MISC form carries the function similar to the W-2 form by reporting your income from the source to the IRS. Keep in mind, despite not receiving your 1099-MISC form, it doesn’t exempt you for not reporting your income when filing tax return.
If you have earned less than 600 dollars yearly from the income source, then you must still report it. Less than this amount just means that the business you did work for doesn’t necessarily need to send you with 1099-MISC but, you still have to report your earnings.
Now if for example that there is inaccurate income reported on 1099-MISC, then it is critical to do a follow up on the issuing business and they have to send you the fixed form 1099-MISC 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 didn’t report your income, you’ll have to send amended return and include the income 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.
Always do your best to keep records of everything you earned accurate throughout the course of the year and report all these earnings to IRS at the time you filed your return.