US 1099-Misc Question

[DrewMcGunn]

I've been working through my own taxes as of late and the pesky issue of 1099-Misc reporting cropped up in some of the guidance I was reading and I thought I would see what others are doing.
As I understand it, if I pay someone $600 or more for services provided, like covers or editing, I am supposed to file a 1099-Misc reporting that income. However, there's a carve-out for payments made through a processing center, like Amazon.
My understanding of how this operates, is that if the payments I made to my cover designer were made through Paypal, I don't need to send the designer a 1099-Misc, because Paypal will be issuing them a 1099-K, provided they receive more than $20,000 in payments).

My question is, are there any writers who are sending 1099-Misc forms to your editors, designers or others, where you paid through Paypal or another payment processor?

[LilyBLily]

It is a huge mistake to send a supplier a 1099-MISC if you paid through a third party like PayPal. IRS rules specifically say you don't have to do that. Suppliers will get a 1099-K from PayPal or the credit card company.

This has been discussed endlessly in the romance writing world because everyone is trying to "do the right thing." But creating an unnecessary 1099-MISC means the IRS gets a double report of the supplier's income. Which gets the supplier in hot water with the IRS. You really, really do not want to do that to a supplier, do you?

Short answer: No, I don't send them.

See https://www.irs.gov/pub/irs-pdf/i1099msc.pdf  It's on page 2, first column, under the heading "Form 1099-K."

[dgcasey]

Short answer: No, I don't send them.

Yeah, I wouldn't send a supplier anything unless they specifically asked me to.

[bardsandsages]

Correct, if you pay someone via Paypal, Google Pay, or some other third-party processor, do not send a 1099.

I do send my authors and freelancers an email at the end of the year that states the total payments we've made, informing them that they will NOT be getting a 1099, but that they may still owe taxes on the income and it should be reported. Because there is still a lot of confusion in some circles, folks have appreciated these so they know not to wait around for a 1099 that is never going to come.

[David VanDyke]

Good tip about PayPal.

However, how does PayPal handle the situation where (for example) Draft2 Digital pays into my PayPal account? How do they know not to double-issue a 1099?

I've never gotten a 1099 from PayPal, despite having received more than $600 per year through PayPal from more than one source..

 

[LilyBLily]

Good question. AFAIK PayPal doesn’t issue a 1099-K until it’s big bucks, but that doesn’t resolve the question of possibly getting duplicate info sent to the IRS.

[bardsandsages]

I've never gotten a 1099 from PayPal, despite having received more than $600 per year through PayPal from more than one source..

Third-party processors do NOT send a 1099-Misc. 1099-Misc is for reporting payments you make to contractors. Third party processors issue a 1099-K, which is a report of all payments you received through that processing service. However, they are only required to send a 1099-K if you have gross payments that exceed $20,000 AND 200 or more transactions. So many people never get a 1099-K.

If you do meet that threshold, then you should check your PayPal account because the 1099-K is probably there but digital. I don't think Paypal actually mails hard copies.

[David VanDyke]

Good. I''m pretty sure I'm not pushing that level, as only D2D and Smashwords pay via PayPal, and those combined sales are usually in the $1K/mo range. All the others deposit to my bank accounts.