When is 1099 reporting required?
Payments to Independent Contractors: Fees for Services and Travel Expenses
An independent contractor is an individual or non-corporate business entity that provides personal services to the District. Some examples of independent contractors are consultants, editors, photographers, caterers and performers. When doing business with an independent contractor, a Contract for Professional Services is required. Payments of $600 or more in a calendar year will be reported on form 1099-MISC.
Costs of travel performed under the terms of the engagement should be negotiated and included as part of the total contract fees. Fees and travel expenses should be submitted on an invoice. All payments made to independent contractors are tax reportable on Form 1099. As independent business entities, these non-employees must maintain their own records and determine their own taxable income. Form 1099 is for information only; it is not intended to report the exact amount of taxable income, but the amount that has been paid to the recipient. Obtaining proper guidance in tax return preparation is the responsibility of the independent contractor.
Payments to Non-Employees: Guest Lecturers, Honorariums, Prizes and Awards Honorariums, prizes, awards and other such one-time payments to non-employees are tax reportable income to the recipients. Reimbursement of travel expense is not tax reportable if adequate documentation is obtained.
Departments may choose to reimburse visiting lecturers, award winners, etc., for expenses incurred in connection with their travel. Travel reimbursements are not included in the gross amount reported on Form 1099 if such payments are made under the accountable plan rules, as defined by the Internal Revenue Service. Travel reimbursements to guest lecturers must be made using the standard District travel forms. Each form submitted should reflect all expenses associated with the visit. Simple requisitions do not provide adequate information to reimburse non tax reportable travel expenses to non-employees. Any payments made that are not documented according to IRS regulations will be considered tax reportable on Form 1099.
How can I know if a provider of services should be treated as an independent contractor or as an employee?
You will find discussion of this topic and helpful analysis tools on MCCCD's Legal Website http://www.maricopa.edu/legal/blc/psvss.htm
Where can I find IRS guidance regarding tax reporting required when hiring an independent contractor?
See IRS forms information at the following sites:
Form W-9 (Request for Taxpayer ID Number) http://www.irs.gov/pub/irs-pdf/iw9.pdf
Form 1099-MISC http://www.irs.gov/pub/irs-pdf/f1099msc.pdf
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