Is a 1099 required when one freelancer hires another?

Question

If I'm a freelancer but I need to hire another freelancer to help me on something, do I need to send the other person tax documents (W9) and report 1099 later on?

Answer 1

IANAL. However according to the IRS you need to file a 1099-MISC if you made any of the following payments

File this form for each person to whom you have paid during the year:

• at least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest;
• at least $600 in rents, services (including parts and materials), prizes and awards, other income payments, medical and health care payments, crop insurance proceeds, cash payments for fish (or other aquatic life) you purchase from anyone engaged in the trade or business of catching fish, or, generally, the cash paid from a notional principal contract to an individual, partnership, or estate;
• any fishing boat proceeds,
• gross proceeds of $600, or more paid to an attorney during the year, or
• withheld any federal income tax under the backup withholding rules regardless of the amount of the payment.

In your case, the operative one would be the $600 "cash paid from a notional principal contract to an individual" (second point above).

Note that this is cumulative, not per-payment. If you made 4 $200 payments to this person during a single tax year you would have to file.

Exemptions can be found here

• You are not engaged in a trade or business.
• You are engaged in a trade or business and
  • the payment was made to another business that is incorporated, or
  • the sum of all payments made to the person or unincorporated business is less than $600 in one tax year (unless the recipient is an attorney or law form, see specific instructions for 1099-MISC for further details).

In my personal opinion, if I was using Quickbooks or something similar, I'd just fill out the form anyway and send it off (with a copy to your supplier). They can decide whether or not to declare the income - but at least you are covered.

Answer 2

Yes, if you and they are in the US and you pay them $600 or more in one year. You will need to file a summary report by a certain date and get the 1099 to them by a certain date. (I think January 30th)

Doing the form yourself is a MAJOR pain because, last I read, it has to be on a certain type of paper with a specific font in a certain way because a machine reads it (you couldn't just print it, I had to buy the forms at office depot then find a typewriter, that was at least 10 years ago so maybe that has changed.)

Anyhow - what I do now is use an online tax filing service, it's less than $5 to have them done and they file the summary for you plus send them to the freelancers. The only thing I don't like about it is typing people's tax info into the Internet, but, what else are you gonna do?!