If you’re a self-employed independent contractor, every client who pays you more than $600 during the year is required to report the payments to the IRS (and your state tax agency) on IRS Form 1099-MISC. This year, for the first time, all 1099-MISC forms must be sent by hiring firms to both independent contractors and the IRS by January 31 to report payments during 2016. In past years, the deadline was February 28, or March 31 for 1099-MISCs filed electronically.
However, a client must file a 1099-MISC only when you are paid by check or cash. The form need not be filed if you are paid electronically—for example, through PayPal; or with a credit card or debit card. But, if you have enough transactions, the electronic payment provider or credit card company may file a form 1099-K reporting the payments. If a client pays you through a third party network like PayPal or Payable, or through an online hiring platform like Uber or Upwork, the network or platform must file a 1099-K with the IRS if you are paid over $20,000 and have more than 200 transactions during the calendar year. However, if you have a credit card merchant account and directly accept payment from a client’s credit card or debit card, the bank or other financial institution that pays you must file Form 1099-K no matter how little you’re paid during the year.
Be sure to check all 1099-MISC forms you receive to make sure they are accurate. The IRS matches the amounts on these forms with the income you report on your tax return. If they don’t match, you’ll get a letter from the IRS. You don't want the IRS to think you were paid more than you really were. If a 1099-MISC is wrong, ask the client to issue a corrected form.
New IRS rules that went into effect this year provide that a payer does not have to issue a corrected 1099-MISC if the error is $100 or less unless the payee—you—ask for one. If you do ask for a corrected form and the payer doesn’t provide one, the payer will be subject to IRS penalties.