Hey pals, it’s about time we learn a little bit about 1099s. I know it sounds daunting, but as college students, we’re at the age where we need to understand what a 1099 is and why we need it. Better to learn now before we get to real adulting.
Does anyone else get chills from that thought?
Okay so let’s get down to business.
Where does a 1099 come from?
So, the government has an agency called the Internal Revenue Service – better known as the IRS. The IRS requires everyone in the workforce to record every dollar they make. A 1099 is typically dedicated to people who make extra income.
What is the 1099 form used for?
You may know the saying, “there’s no such thing as a free lunch.” Well, the same kind of goes for the money we make. The government uses 1099s, and other forms of recording income, to understand how much money you owe the government based on the amount of money you made during the fiscal year.
Is there only one type of 1099?
Haha, could the government really make anything that easy? No. As of 2018, there were at least 20 different types of 1099s. At Pangea.app we use 1099-MISC, which is used to report miscellaneous work.
What’s considered “miscellaneous” income?
Well, what we do for companies through Pangea.app is essentially miscellaneous income. The IRS considers freelance work miscellaneous and even though we may not be making a ton of money, we still get taxed on what we make. Independent contractors also fall under this type of 1099. Since most of us are still students and don’t have full time jobs, we can use Pangea.app for freelance work, which means we’ll be getting a 1099 form at the end of the fiscal year.
Is there a cap on how much I can get taxed?
The short answer to that is: not really. If you make money through any form of working, the government wants to know about it. In fact, a 1099-MISC isn’t just to record revenue made from working, people use it to record prizes and rewards greater than $600 bucks. Kind of like if you won the lottery or the mega-millions.
Is there any good news when it comes to adulting?
I can’t necessarily confirm anything about adulting, but I do have some good news when it comes to your 1099. Pangea.app handles everything for us, which is kind of a perk when you’re going to classes and balancing internships with freelance projects.
And even though it feels overwhelming sometimes, especially in a pandemic, you’re doing the best you can. You rock!