Since I paid my contractors all via PayPal, I understand PayPal will send those contractors a 1099-MISC for totals over $600. I was told not to worry about sending them 1099-MISCs myself.
My website generated a revenue of over $20,000 (around $39k), so I am expecting a 1099-K from PayPal.
This is my first tax season of running the website. I have no idea how I should file for my income and tell the IRS that most of my income from my website (revenue via PayPal) was paid out to my independent contractors also via PayPal.
My biggest concern is that I don't want the IRS to think that the full $39,000 was fully my own income. I actually only retained about 50%.
Are those costs deductions?
I appreciate any insight.
Yes, wages paid to independent contractors are deducted from your business income. The flipside of a 1099-MISC to a contractor is a 1096 filed on your side of the payment equation. You need to verify that PayPal is also handling that piece for you.
You would have $39,000 in gross income (using your example above), from which you would deduct the wages paid to your contractor's (as well as your other deductible expenses), to derive your taxable income.
Make sure that you fall on the right side of the IRS definition of what constitutes an IC. Getting that one wrong can be a big problem.
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