US tax question - 1099

Factual Questions
1

Okay, I’m not asking this for guidance on how to conduct my tax affairs, just out of curiousity, so I’ll assume all the replies start with IANACPA, IANATP, IANATA etc.

My work situation puts me in a position to be paid for small contract jobs with several companies, and I have been informed by my accountant that each company has to issue me a 1099. I asked him what makes my services different (creating engineering drawings) from those of, let’s say a plumber one of these companies might hire to repair their pipes. He said that my services were used in the generation of revenue for the company.

Out of curiousity, I went to the IRS website and looked

http://www.irs.gov/businesses/small/article/0,,id=99184,00.html

which states “If you make payments in excess of $600 to a worker who is not considered an employee, you must prepare Form 1099 Miscellaneous Income.”

So…if I (assume I’m just a guy, not a business) were to redo a bathroom in my house and pay a plumber $1,000 to do all the plumbing, why don’t I have to file anything like a 1099? Just because I’m not a business?

Same situation, but say I run a business like a restuarant or a grocery store, and I hire a plumber to come in and do $1,000 worth of work…do I then have to file a 1099 for the plumber?

I feel like the explaination is really simple, like maybe in the definition of terms, but it is confusing me still. Thanks in advance, sorry for the rambling.

-rainy

2

My understanding (IANAA) is that you are supposed to file a 1099-MISC in all of those instances. Obviously not everyone does, and it’s really, as I understand, in the case of an independent contractor (sub-contactor) vs a business. (That last part may be way off). I know that sometimes companies that spend a lot of money with us will request to see a tax certificate or other forms from us. Many of our sales are greater than $600, although it’s almost always in terms of goods and not services.

3

If it’s Bob the Self-employed Plumber, then you (as a business) do have to. If it’s Bob of BobCo Plumbers Inc, then no. Most payments to Plumbers are to companies.

However, filing of such returns is GENERALLY limited to “payments made in the course of a trade of business” (IRC 6041, IRC 6045etc). So, Fred the homeowner doesn’t GENERALLY have to worry about filing such froms.

Note there are different forms/taxes you may have to file for domestic help- aka the “nanny tax”.

I am not a tax expert, but my Bro is.