How do I ensure this project is taxed properly?
October 8, 2013 7:49 AM   Subscribe

I'm doing a website project for a local musician, but I need to make sure it's "above board" as far as the IRS is concerned. How do I proceed? 1099 forms, etc?

Basically I want to refinance my house in 2014 and in order to do that, a bunch of little under-the-table projects I'm doing this Fall need to be documented. What is the protocol for asking this type of freelance client (who does not have an LLC or company or anything) to provide relevant paperwork? Thanks!
posted by deern the headlice to Work & Money (3 answers total)
Really it is just on you to report all your income on your taxes. You don't need a 1099 to do so. People SHOULD send you a 1099 if you do more than $600 worth of work in a year but in reality I'm guessing that most people like this guy aren't going to do that.

All you need is some sort of bookkeeping method to account for all your income and expenses and then fill out your tax return with that data. There are loads of bookkeeping programs out there that you can use to keep track of your business expenses/income (because really you are a business now).

Personally I use wave accounting. It is free and online.
posted by magnetsphere at 8:03 AM on October 8, 2013

My understanding is that if you're the person doing the work and he's the one paying you, the only thing you need to worry about is declaring the income on your tax return and making estimated tax payments every quarter. He is supposed to fill out a form 1099-MISC at the end of the year if he pays you more than $600 and send a copy to you and one to the IRS, but even if he doesn't or if you are paid less than $600 you are still responsible for declaring it. This IRS page has more info.
posted by ultraviolet catastrophe at 8:04 AM on October 8, 2013

As far as the IRS is concerned, what commenters have said above will get you on the right track.

However, as far as your bank is concerned I believe they are most interested in steady or proven streams of income. For freelance/1099 income they want to see 2 years of steady income for you to count this as an income stream. One way to do this is with tax returns, though I'd save paid invoices as well. If you got a few odd thousand bucks one year from freelance work, they might find it hard to justify that as proven income.

At least thats what goes for a first mortgage, a re-fi may be less strict. Bank to bank, and bank to credit union might all have slightly different policies re: freelance income.
posted by fontophilic at 9:09 AM on October 8, 2013

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