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. 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 you get the 1099-MISC, you have to review the box number 7 or “non employment compensation”. This is basically where your income is recorded from that business. 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. For this reason, the 1099-MISC form has the same function as the W-2 in a way that it reports your income from this source to 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 think that you are saved from not reporting your income if you made 600 dollars or maybe less from the income source every year, better think again. 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 reported income on the form 1099-MISC is not correct, then you must message the issuing business ASAP and they have to send you the corrected form 1099-MISC and to the IRS as well. 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. Say for instance that you have not reported your income, you will then need to send an amended return and incorporate the income that it states in 1099-MISC form. Most likely, this is going to lead in owing bigger taxes and potentially with penalties and interests if the amended return is received 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.