Understanding the Purpose of IRS Form 1099-MISC

Form 1099-misc is Used to Report Payments of $600 or Above to Specific Individuals and Businesses. However, It Doesn't Include Non-employee Compensation.

Yes, You Need to Report Any Income on Your Tax Return That is Specified on a 1099-misc. You Need to Keep the Form for Your Records and Not to File With Your Taxes. You Should Subtract Any Withheld Taxes, Including State and Local Taxes, on the Relevant Return.

The primary difference between 1099-MISC and 1099-NEC is:

• Form 1099-MISC is used by a business to report miscellaneous payments made to a contractor or an individual. It includes payments of $600 or more for rent, prize, awards, and other incomes. 
• On the contrary, Form 1099-NEC is used to report non-employee compensation, such as payments made to freelancers and contractors.

Yes, 1099-misc is Considered Proof of Income. It Reports the Overall Amount That You Have Earned as an Independent Contractor or Received From Other Non-employee Payments. You Can Use This Form for Tax Filing, Applying for Loans, or Verifying Income. For Additional Support, You Must Keep Extra Records Such as Invoices or Bank Statements.

Your tax liability will depend on your income and state. However, generally you pay:

• Self-employment tax: 15.3%
• Federal income tax: 10%-37%
• State tax: 0% - 10% or more
• Most of the freelancers keep 25%-30% aside from the earnings to cover the taxes.