You have this freelance writing thing down cold. Your writing sparkles with informative content that educates and entertains audiences of all ages and backgrounds. Editors are calling on the hour with request for more work at whatever rate you name. You finally ditch that boring nine to five job and now spend your days with your laptop in that trendy coffee shop where all the cool people hang out.
Wait, that is not what is happening to you? Me neither. However, we are working, and getting paid, so it’s not all that bad.
Speaking of getting paid, you will have to report that income to the IRS. Since you are getting paid as a freelance writer, you are not an employee so you would not get a W-2 like at your regular job, but would get a 1099-MISC. Additionally, your clients will need to report how much they pay you to the IRS if they paid you more than $600. They would use Form 1096 to report all the amounts they paid to freelancers, and would send you a Form 1099-MISC which shows the amount they paid you for the articles you wrote.
The IRS requires that you get these by January 31st every year, so you should receive them in the mail in late January. There are a few things you should do once you receive this from:
- Make sure you did work for the person or company who sent you the form. Keep in mind that the name on the form may be different that who you normally deal with as you may have been dealing with a subsidiary, and the 1099 would have come from the parent. If you didn’t do work for the company or person who sent it to you, the company who sent it to you may be trying to defraud the IRS by over reporting the amount in expenses they had. If you hadn’t done work for them, contact them for an explanation. If you can’t get a satisfactory answer, contact the IRS.
- There is a box labeled RECIPIENT’S Identification Number. Make sure that this is either your social security number or the Employer Identification Number (EIN) you were assigned when you registered your company with the IRS. If it doesn’t match, get in touch with the sender to correct it.
- If you got royalties for your work, these would show in Box 2 of the form.
- You may be subject to something called backup withholding if you did not give a taxpayer identification number to the person or company who paid you. You will have had to have given a W-9 containing this information to the person or company paying you; otherwise you will be subject to backup withholding. Box 4 on the 1099-MISC will show the amount of backup withholding taken from the amount owed to you. If you had backup withholding, check your records to see if you sent them a W-9 with your information. Contact the company if you had sent them the information so they can adjust their records, and send you a corrected 1099-MISC.
- Box 7 will show the amounts paid to you as a writer. This amount will need to be reported on Schedule C of your tax return. Check this amount with your records to see if the amounts tie to what you billed the company. Contact the person or company who sent it to you if there is a difference in what your records say
- Box 11 will show the amount of foreign tax you paid. You may be able to either deduct this or claim it as a credit on your tax return. Box 12 will show to which country the tax was paid.
Dealing with form 1099-MISC is just part of doing business as a writer and is nothing to be nervous about. An understanding of what is on the form will help you to properly report your income on your taxes. If you run into something you don’t understand contact a good accountant, who is always happy to answer questions and help out people who need assistance with tax matters.
In accordance with Circular 230 Treasury Department Regulations, we are required to advise you that any tax advice contained in this article may not be relied upon to avoid penalties under the Internal Revenue Code. If you are interested in a written opinion that can be relied upon to prevent the imposition of tax-related penalties, please contact the author.
About the Author
The author, Chris Peden, CPA, CMA, CFM, has over 15 years of experience with helping people and companies with organizing and making sense of their finance information, as well as meeting their regulatory compliance requirements. He is also available as a freelance blogger if you need an article on finance, accounting or taxes for your blog. He can be reached at chrispedencpa@yahoo.com, and his website can be found at http://cmpfinancialconsulting.homestead.com/.
Image via 401(K) 2013
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