Sole proprietors don’t need to fill out form 1099 unless they hire contractors or subcontractors. If they operate alone, they use this form to report their earnings. A 1099 form records payments received by someone other than an employer.
Sole proprietors should use IRS Form 1099-MISC to report payments incurred during business activities. Though simple, sole proprietorship carries risk because the proprietor and business are legally one. If a business pays a person or another business over $600 in a year, a 1099 must be issued. This is required whether the $600 was in a lump sum or over the course of the year.
If your attorney exceeds the threshold, they receive a 1099 whether incorporated or not. You will provide a 1099 to any sole proprietor vendor. A 1099 needs to be sent to sole proprietors, partnerships, and LLCs paid over $600 for services. IRS rules decide if a worker is an employee or contractor.
Self-Employment Taxes and 1099-NEC
Any salary or profit the owner earns from the business is subject to self-employment taxes of 15.3 percent, including Social Security and Medicare. You may need to file a 1099-NEC form if you paid $600 or more to an independent contractor during the tax year.
Common Questions About 1099 for Sole Proprietors
Do sole proprietors receive a 1099 form?
Typically not.
Who must file a 1099 form?
Any business, including a sole proprietorship, that pays over $600 in a year to an unincorporated business or individual.
What happens if a sole proprietor receives a 1099?
The IRS will see that income as self-employed.
How are sole proprietor profits taxed?
At the owner’s personal tax rate, including 15.3% for Social Security and Medicare.
Do I give myself a 1099 if I own the business?
No. As a sole proprietor, you generally will not give yourself a 1099. Instead, you report your income on your personal tax return.