This was the year of the incorrect 1099.
A number of The LC Group clients had 1099s issued with incorrect information, specifically incorrect earning numbers. And because we keep good records and were checking, we were able to catch those with mistakes.
A little info for those of you who may not be familiar with 1099s. A 1099 is the tax form that an independent contractor would receive (as opposed to a W2 form that an employee would receive). There are rules governing who can and can’t be considered an independent contractor. As an independent contractor it is a good practice to provide a W-9 form with your pertinent tax information at the time you send out your first invoice. At the end of the year if you earn over $600 from the client, your client should provide a 1099 which states your earning with that client.
As an independent contractor, it’s most prudent to keep track of your earnings and expenses by using accounting software. (Quicken Home & Business or Quick Books are two popular choices.) Many individuals falsely believe that firms that hire independent contractors would have correct information, but that clearly isn’t the case. I had situations where reimbursements of expenses were included in the 1099, and only wages should be included. Independent contractors should not depend on the proficiency of the individual who handles the processing of 1099s.
If you are using PayPal, Apple Pay, or other third party services, I encourage you to oversee your transactions on a monthly basis to make sure the income information is correct. It would be most prudent to make sure you are processing refunds correctly, because there have been cases where the refunds have not be deducted from the income.
So the take away, for all of you who may be independent contractors, is keep track of your earning.
We hope you enjoyed this blog edition from Financially Fit in Five. If you have any questions, please reach out to us at The LC Group.