Rules for Reporting 1099 Income
With the increase in bloggers, internet marketers, and other online business owners, the subject of how to report 1099 income has been coming up frequently.

While most folks are aware they are required to report W-2 wages, commissions, interest, dividends, tips and commissions as income on their tax returns, many don't realize that they must also report other income, such as:

* cash earned from part time businesses,
* income or goods that they barter with another person for,
* prizes, winnings from contests, awards and
* gambling winnings

Essentially, you have to report all income earned from any source (and any country) unless that income is specifically exempt under the United States tax code.

So if you earn money from banners on your blog, selling items on eBay, selling products for a commission, or providing a service to another person (even if that service is all done via the Internet), then you are required to report that income.

If you are working as an independent contractor and you earn $600 or higher (from one company or individual), you should receive a Form 1099-MISC reporting your income. Even if you don't receive a Form 1099, you still have to report your income.

It is a common misconception that if a taxpayer does not receive a 1099 form or if the income is under $600 per payer, the income is not reportable. There is no minimum amount that a taxpayer may exclude from gross income.

Self employed people must report all income as taxable, even if under $600. Even if the client does not issue a Form 1099-MISC, the income, whatever the amount, is still reportable by the taxpayer.

The good news is that as an independent contractor, or as a self employed business owner, you get to deduct ordinary and reasonable business expenses against your income.

To report your income and expenses from your self employment income, use Schedule C: Profit or Loss From Business, which is then attached to your personal tax return. You will also need to complete Schedule SE to calculate your self employment taxes if your net profits from your business are greater than $400 for the year.

As an online business owner you are responsible for self employment taxes on top of your regular tax for your net profits. Since the SE tax is 15.3%, this can add up quickly.

It's crucial to know what expenses you can deduct from your business income so that you don't overpay Uncle Sam. For a list of tax deductions for online business owners, please go to: http://internetbiztaxtips.com/2008/02/list-of-tax-deductions-for-online-biz-owners/