Help with small business tax question?
I’m a self employed/independent contractor and I am interested in paying a friend to be my business consultant. I’ve heard that you can pay someone up to $600 and not pay taxes on it or maybe just not have to put together a 1099 for them?
I want to find out whether I can write off the money I pay her and up to how much can I write off and so on.
Any help would be really appreciated!
If she is a true consultant and NOT an employee, once you pay her $600, you MUST issue her a 1099-MISC. HOWEVER, no matter the amount, she must claim it as income.
This would be an expense for you.
Helen, EA in PA
Recommended Reading
- Family Business Consultants Help Businesses Grow
- Online Advertising – Small Business Consulting- Advertising Businesseses Consultant
- What Family Business Consultants Do
- Small Business Sales – Legal Factors to Consider in Selling Or Buying a Small Business
- Business Strategic Development For Family Business Consultants
If she is a true consultant and NOT an employee, once you pay her $600, you MUST issue her a 1099-MISC. HOWEVER, no matter the amount, she must claim it as income.
This would be an expense for you.
Helen, EA in PA
References :
If you pay her less than $600 you don’t have to give her a 1099, but it’s still taxable income to her if it’s over $400 or if she files a tax return for some other reason.
References :
If the person is also an independent contractor, you do not pay tax on your payments to her, but she does, even if she only makes $1. You issue a W-2 if you pay her over $600, but not if you pay her less than $600.
If she is your employee, then you both pay tax, and you must issue a W-2, even if she only makes $1.
On your taxes, you can deduct the payments to her only if you were paying her because your business needed her consulting services, not if you were just trying to help a friend.
References :