Hello,
So I paid 2 [people more than $600 last year, for book editing services.
Do I need to issue them each some kind of 1099?
Google says probably, and by default I'm a sole proprietor.
I know this isn't exactly game related…and I'm asking a few places
Consult an accountant/business advisor if possible.
Based on my previous work (I'm not in the US - so I may be wrong/remembering wrong from the talks with ppl in US) - you do, unless you paid a corporation, subject/person outside of US, etc. (there are few cases when you don't)
Note: Most of my work was with businesses only, I'm not sure whether same laws/rules apply to sole proprietors!
You absolutely need to research this in a much better way than asking strangers on the internet. Dig deeper into IRS regulations, and yes, consult a business adviser. In the US, the Small Business Administration offers business advice at no cost. Dig into that. You need good Google-fu to survive in business! And do not ask that guy who told you you have to patent your card game.
That said, I believe you don't need to file a 1099 for this sort of small contract work. But you really need to get advice from someone more trustworthy than me (or any stranger on the internet).
Tom Sloper said:
You absolutely need to research this in a much better way than asking strangers on the internet.
This is part of research= asking communities I'm part of.
I'm not relying on you guys being the definitive word, but I'm getting some conflicting information from the research I've done so far.
I just need to do more digging.
GeneralJist said:
more than $600 last year
I've got some family members who are accountants and we've had the discussion a few times. Details matter. Exactly how much more than 600 will be the big factor. Since it is payments out it is less important than income you made. Talk to a tax professional if you're concerned about it at all.
For a hobby project you're most likely part of what's called the “gray economy” or “informal economy”, big enough that money starts to matter across all of society, but small enough it often isn't reported. Small hobby businesses in the category can mean things like private music lessons from the home, teens doing child care or yard care or pet care.
If you're running your small business as a business, taking steps to organize it as a legal entity, maintaining proper bookkeeping, etc., then err on the side of caution and submit the forms even if they're near or below the reporting limit. They're not difficult to file. Better safe than sorry.
If you're running it as a hobby, it's mostly about risk tolerance. If it is clearly a hobby and you hired them as a one-off service that's not something they typically care about during audits. In that case since you're not doing business reporting and business filings then it is considered the responsibility of the person making the money, less the responsibility of the person paying the money. For example you don't send tax reports about your other monthly services, your monthly internet bill, your monthly power bill, your groceries, even though they are regular expenses made to other entities. You probably don't even have their tax information to properly report it, anyway.
The big thing the IRS cares about is that they match. Whatever the payer submits and the payee submits should be the same.
You should research this thoroughly and consult a business adviser to get proper guidance on IRS regulations. Small Business Administration provides free business advice and stop relying on strangers on the internet.
