Do You Have to File a 1099 for a Contractor Hired to Work in Your Own Home?

by Fraser Sherman Google

    The Internal Revenue Service relies on 1099 forms to catch payments that the Form W-2 misses. When you receive dividends or withdraw money from an individual retirement account, for instance, you get a 1099. The 1099-MISC goes out when a business pays a nonemployee. One copy goes to the IRS, another to the independent contractor who did the work.

    If you hire someone to paint your store, for example, you might have to send her a 1099-MISC. If you hire someone to paint your house, don't sweat it. The 1099 form is for businesses: If a contractor does work for you in your private home, it's his responsibility to report the income. Even if the same person painted your house and your store, you don't include the payments for your house on your business's 1099.

    If the contractor's painting your home office, and you claim home-office expenses as a deduction, a 1099-MISC might be necessary. The reporting requirement kicks in if you pay a contractor at least $600 during the tax year. That doesn't have to be all in one shot, so four $150 payments would do the trick. A $550 payment doesn't require a 1099. In that case, it's up to the contractor to manage his own reporting.

    If you rent out a house or apartment, you may worry that you have to send 1099s to contractors you hire to work on that house or apartment. A clause in the 2009 Affordable Care Act said that when you own a rental, you send a 1099-MISC to anyone who billed you more than $600 for work on the property. That rule was repealed, but the old information is still out there in cyberspace, adding to the confusion. Unless you're a real-estate professional, you're safe, and you don't have to file the 1099 for that work.

    Businesses send out the 1099-MISC in a few other circumstances. If a company has to pay someone $10 or more in royalties, the recipient gets a MISC form. Any amount paid to a fishing boat operator requires the form to record the transaction. The form goes out to independent contractors and partnerships, not corporations -- they have different reporting rules -- but law firms are an exception. If a company pays $600 to an incorporated law firm, that does require a 1099-MISC to be filed.

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    About the Author

    Fraser Sherman is a former reporter with the "Destin Log" newspaper and now freelances full-time. His work has been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life," and he's the author of three film reference books, including "Screen Enemies of the American Way." He specializes in finance and tech articles.

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