Can a Sole Proprietor Issue a 1099?

[Vincent]

Jurisdiction

Illinois

Hello,

I live in IL.

I I'm just a sole proprietor with no LLC, S Corp, or EIN.

My question is can I as a sole proprietor issue a 1099 for someone that has done work for me?

I personally use TurboTax Home and office and it gives me the option to give someone a 1099.

I am probably going to use a CPA this year given my various questions I posted on this website and help that has been given to me so far.

My question is still the same can I give someone that I have paid more than $600 to a 1099 being just a sole proprietor?

If so can I write them a check from my personal checking account since I don't have a business checking account yet?

Do I have to have them fill out a W-9 at all given my current tax status?

I almost forgot to ask, does it make a difference if it is a non-family member or a spouse?


So my wife for example has assisted me with work and she needs to be paid at some point, it is more than $600 worth of work, since we are filing married jointly how would I or should I pay her specifically?

For someone that is not family, same question as above what is the best practice in paying them?


Thanks for your help in advance!

 

[Tax Counsel]

My question is still the same can I give someone that I have paid more than $600 to a 1099 being just a sole proprietor?

You are required to provide the subcontractor (assuming that the person was really an independent subcontractor rather than an employee) with a Form 1099 NEC if the total you paid that person during the year is $600 or more.

You should always get the Form W-9 from a subcontractor. You need that information to complete the 1099 NEC and if the subcontractor provides you with false information having the W-9 can help you avoid getting penalized for that.

If so can I write them a check from my personal checking account since I don't have a business checking account yet?

[/QUOTE]

As a sole proprietor you may do that. I wouldn't recommend operating that way as it makes harder to prove what income and expenses were for the business as opposed to something else.

I almost forgot to ask, does it make a difference if it is a non-family member or a spouse?


So my wife for example has assisted me with work and she needs to be paid at some point, it is more than $600 worth of work, since we are filing married jointly how would I or should I pay her specifically?

If you pay your spouse for the work and she's really an independent contractor then she'll have to be issued a Form 1099-NEC too. Depending on the details of the arrangement, though, she may be your employee or a partner. You have to correctly determine what status she has and then apply the rules for that status. You also need for her status to be consistent and you need to keep good records to support it.

For someone that is not family, same question as above what is the best practice in paying them?


Thanks for your help in advance!

For anyone you hire, whether employee or subcontractor, you want to pay them in some what that provides an independent record of the payment in the event of an audit — that may be a check, electronic funds transfer (EFT), direct deposit, or if they take credit/debit card payments, you could use your business credit/debit card. Paying in cash is not the best way to go, but if you do pay cash get from them a signed receipt acknowledging that they were paid $X in cash for work they did for you. That's important not only for tax purposes, but also in event you wind up in a payment dispute with the subcontractor.

 

[Vincent]

You are required to provide the subcontractor (assuming that the person was really an independent subcontractor rather than an employee) with a Form 1099 NEC if the total you paid that person during the year is $600 or more.

You should always get the Form W-9 from a subcontractor. You need that information to complete the 1099 NEC and if the subcontractor provides you with false information having the W-9 can help you avoid getting penalized for that.

As a sole proprietor you may do that. I wouldn't recommend operating that way as it makes harder to prove what income and expenses were for the business as opposed to something else.



If you pay your spouse for the work and she's really an independent contractor then she'll have to be issued a Form 1099-NEC too. Depending on the details of the arrangement, though, she may be your employee or a partner. You have to correctly determine what status she has and then apply the rules for that status. You also need for her status to be consistent and you need to keep good records to support it.


For anyone you hire, whether employee or subcontractor, you want to pay them in some what that provides an independent record of the payment in the event of an audit — that may be a check, electronic funds transfer (EFT), direct deposit, or if they take credit/debit card payments, you could use your business credit/debit card. Paying in cash is not the best way to go, but if you do pay cash get from them a signed receipt acknowledging that they were paid $X in cash for work they did for you. That's important not only for tax purposes, but also in event you wind up in a payment dispute with the subcontractor.
[/QUOTE]
Thanks again for all the helpful information!