All of your business income is reported on SCH C as a part of your personal return (assuming you are a sole proprietor or single member LLC). You report all income - every penny of it, in the business income section. Your costs of doing business, such as paying 3rd party contractors, is dealt with in the business expenses section.
If you issue the contractor a 1099-MISC, then he is just that - and independent contractor. He's not an employee on your payroll, and tax withholding/reporting on that is not your concern.
