Hello everyone,
I am a general contractor from California specialized in bathroom and kitchen remodel.Thru the course of my projects I am collaborating with various designers in compiling the remodel package for clients.My agreement with designers is on fee basis or precentage of the contract. As a contractor I know that is legal to hand 1099 forms only to licensed subs. How do I deal with designers in regards of writting off the money paid to them considering that they are not licensed(in other words is it legal to hand 1099 forms to designers?)
thanks for your input!
Ovi
Replies
I haven't dealt with any designers, but I would think that they would just be another service provider.
I have a guy who does all my trickier cabinet/furniture finishing. He has his own business and shop and invoices me for his work. No 1099's involved.
Same thing with my accountant.
thanks a lot
Whether a 1099 is involved or not the designer is responsible for paying the income tax on moneys paid. You pay them, write off the expense, and the ball is in their court for claiming the income.
No different than paying the service center for a tool repair.
Don't call me daughter.
Ovi,
Employees get W-2s, everybody else gets 1099s. In most instances you'll have to file a 1099 for any non-employee who you're paying more than $600 in a year. It is not a requirement to file a 1099 to write off an expense.
The question is whether that person is an employee or not. The IRS has guidelines on what makes someone an employee. I'll bet that if you check the guidelines you'll find that your designer is not an employee, but that's just a WAG on my part. In any event, you definitely don't want to get on the wrong side of this.
Having said all of this, judging by your question, you would probably be money ahead to establish a relationship with (at least) a tax preparer who could help you with these questions.
dustinf is right, it's up to them to pay their taxes. Do they give you a receipt or some type of bill?
http://www.ehow.com/how_13664_know-issue-1099.html
How to Know When to Issue a 1099-MISC
Just looking for some clarification, I read that site you linked to and bullet point 3 has me confused. the last sentence says "Payments to corporations are included only if they are for medical, health care, legal or fishing activities." I'm not into the business as of yet so i don't know alot of the more technical terms but is that the line and pole type fishing?
If it's not broke I can fix it
I missed that. That's funny as hell. What's it mean?
Charter boatsSamT
"As a contractor I know that is legal to hand 1099 forms only to licensed subs."
Any individual that you, as a buisness, pay more than $600 a year should get a 1099.
Has absolutley nothing to do with whether thay are sub-contractors or licensed or not.
Some examples outside of the construction subs would be office/storage building rent, lawn care, snow removal, CPA, etc.
Bill is correct, but I would add that if they are a corporation then they don't get a 1099.