Barbara -

The paper work is not really too complicated, so whether you need an accountant is a matter of whether you are willing to spend your own time doing it, or prefer to pay someone else.

The decision may also depend on whether you paid all the bills for the band, or whether other band members may want to (or be able to) claim "performance expense" as deductions.

In principal, the 1099 you received shows that you had income as an "independent contractor." You most likely will need to include "business income and expenses" on your tax return in order to show that it wasn't all net income that you would have to pay taxes on. The downside of having such income/loss information on your return is that it may mean paying an additional tax for you. The additional "hit," other than the simple tax if you call it ordinary income, is the Social Security/Medicare due on the "band income."

In all likelihood, the people who sent you the 1099 did not make any withholding deductions - i.e. they didn't take out anything for income tax, social security, or medicare. If the 1099 doesn't show any withholding, it doesn't have to be filed with your return, but it should be reported on your tax return.

You can "pass" the income to the band members by giving each of them a 1099 to show what their share of band income was. This lets you list the payments to the other members as "payments to independent contractors" and deduct it from your income.

You don't really have to use any particular "form" to notify the other band members, as long as it's written and has some indication that it's "in lieu of form 1099;" but you do need to file, on the proper form, a "1099 summary sheet" with the IRS that shows that you paid the other band members and that you gave them the "1099 notice" that they should report their individual income from the band. You can get the forms from your local IRS office.

Since you received the 1099 showing income, it has to appear on your income tax return. If you can show enough "band expenses" to wipe it out on your own return, you might consider just handling it there. If it's going to cost you tax on money you didn't get, then you pass the appropriate amounts on to the other band members by giving them individual 1099s, and file the 1099 summary with IRS to show that it's their income and not yours.

The forms are not at all complicated, but there is a deadline for getting the individual 1099s to the band members and reporting it to IRS, so you need to check with IRS for the dates for this year. It is very soon, if not this week! [It's March 1, see below]

If you normally "do your own" tax returns using one of the commercial tax programs, you probably will not find the 1099 forms in the simple packages - you'd have to get a "business" version. Paying extra for one of these is not really too helpful, if its just for printing 1099s to give to your band members; and I'd suggest just getting the forms from the IRS.

If the amounts involved are small, you and the band members can probably still use the "individual" programs to file your tax returns; but that depends very much on how complicated each person's return gets.

The 1099 income each member reports may subject them/you to a "Self Employment" tax. This is the FICA/Medicare tax on any income for which no deduction was made, and is the amount you'd have paid if you got it as wages, plus half the amount a regular employer would have paid for you. Other than that, it's just a matter of making sure that the money gets "credited" to the person who got it.

NEW STUFF

The "bottom line" is that the 1099-MISC that you got shows that you have income that you have to report on your return. You can show that you paid it to the other band members by filing a 1099 with the IRS, showing that you gave each band member a 1099-MISC for the payment of their shares to each of them. (You do, theoretically at least, need to show the taxpayer identification number (SSN) for each band member on the one you file with IRS.)

You will likely have to file at least one additional form with your own income tax return (I think its a "Schedule C," but check that out when you get to filing your return).

You can get some additional info from IRS FAQ 1099-Misc

The "Information Return" (1099) you file with the IRS to show that you gave 1099-MISC reports to the other band members is described at href="http://www.irs.gov/govt/fslg/article/0,,id=110125,00.html">Information Returns

Instructions for the 1099-MISC are at 1099-MISC(.pdf 7 pages)

The instructions seem to say that, technically, you would only have to give a 1099-MISC to a band member who got more than $600 from you last year, but you're "covered" if you report all such payments. (If the payments were smaller, you could probably deduct them as "undocumented payments to independent contractors" or some such on your return.)

You have to go to General Instructions for 1099 to find that the filing date for your 1099 with the IRS (the list of what each band member was paid) is March 1. Individual band members should be given their 1099-Misc reports by then as well.

Note that I'm not a "tax consultant" on this, just a reasonably experienced "user." The 1099 system is sort of like a "sticky note" you can use to tell the IRS "it ain't my money" and to tell the other band members "it's yours - you gotta deal with it;" and it actually works about as well, and as easily, as anything else associated with the IRS.

John

Posts combined, links repaired by clone