Hiring independent contractor for less than $600

[Hayley8]

Hi, I am considering hiring two people as independent contractors to help with a project. The potential employees should receive about $500 each for the year for the work. I believe that I should not be required to file a 1099 MISC or send them W-9's since they are each receiving less than $600 annually. Are there any other forms that I would be required to submit to the IRS in order to hire these individuals? Thank you!

[VolvoGirl]

No.  You just enter the total paid fir everyone on your schedule C as Contract Labor.

[Critter-3 · Accepted solution]

I HIGHLY recommend you ALWAYS have ANY & ALL contractors you pay for any amount  fill in a form W-9  BEFORE you pay them one thin dime to CYA.   This way if you do pay them $600 or more during the year  you will have the info you need to send out the 1099 in January when you cannot find them to ask for the info later.  Also, even though you don't need to send a 1099 for less than $600  if the IRS was to audit the return you still must provide the info on WHO you paid ... so do this in advance and save yourself worry later. 

FYI ... if you paid 10 people $500 each during the year the total on the contractor line on the Sch C would be $5000 which is more than $600 so the IRS will look for the 1099 forms they believe you should have filed even though you  did not need to  and send you a letter of inquiry and if you cannot provide evidence of who you paid and how much they can disallow the entire deduction.   This is where a penny of prevention is worth a pound of cure ... cheapest insurance policy you can buy.   Free to print from the IRS : https://www.irs.gov/pub/irs-pdf/fw9.pdf

[Carl]

Paying an independent contractor less than $600 in a year does not in any way negate your legal requirement to prove it, if audited by the IRS. Require all independent contractors provide you a completed and signed W-9 before you pay them one single penny. Failure to do so can (and most likely will) come back to bite you.