1099s for musicians
Written by: The Buddi Team
I've been freelancing for over four years, and one of the worst parts about it is the paperwork. I get a client, fill out a W-9, and wait for my 1099 to arrive each January. What's more, I've had clients who haven't sent me 1099s, which is a federal requirement for payments of over $600.
When I received my first 1099 about four years ago, I wasn't quite sure how to handle it. Up until that point, I'd only ever worked "traditional" jobs where the employer deducts taxes.
However, a 1099 is an important tax form. It tells freelancers and the government how much the freelancer in question was paid in a year. As a freelancer, I use the form to help file my taxes and ensure I don't overpay or underpay taxes.
While I've never hired other freelancers, I can only imagine what it's like to complete all of those forms and send them to people. Sending emails back and forth only to realize the freelancers filled out the form incorrectly.
Then, you have to go back and forth again. And you have to do it in a time crunch so that you don't miss the deadline to send them a 1099.
Luckily, 1099s don't have to be that overwhelming. Keep reading to learn how they work and why they're so important.
Overview of Form 1099
You can use different types of Form 1099, but the type you'll most likely use is a Form 1099-NEC. If you ever hire any musicians and pay them more than $600 in a year, you'll need to request a signed W-9 and then have to complete the 1099 form for them.
What Goes on a 1099
The first step in filling out a form is to include the payer information. This would include your name/business name, contact information, and tax identification number (TIN) or FEIN. Next, you will need to enter the details of the recipient by referencing the signed W-9 you retrieved from them. You must also include the same details of the recipient.
The most important step is to include the amount you paid the recipient that year. In most cases, as a musician, you'll put that number in Box 1, Nonemployee compensation. If you rented any gear through that recipient, you’ll likely need to issue a 1099 MISC that shows you paid them for the rental.
I know that as a freelancer, it can be hard to keep track of all of the gigs you do, so receiving 1099s helps me double-check my own calculations. …
How to Create 1099s
Before you can complete a Form 1099, you must collect a Form W-9. The form provides everything you need regarding the freelancer and their contact and tax information.
To request a W-9, you'll need to:
Find the form to send to the freelancer (or hope they know where to find a blank copy).
Ask for the form and wait for them to fill it out.
Review the form to make sure it's complete and all of the details are where they need to be.
What's more, the gig could pass by, and the freelancer may forget about the W-9. Then, you'd have to contact them again and hope they can fill out the form. Plus, you'll have to go through this process every time you hire a new musician.
Assuming you have a W-9 from someone, here are the steps you'll then need to follow when creating 1099s:
Review the freelancer's W-9, and use it to fill out their contact details and tax number on the 1099.
Add your name, contact information, and TIN.
Fill out the amount of money you paid the freelancer.
Send copies of the form to the recipient and the IRS.
Repeat for each 1099.
Important Dates to Remember
If you have to send 1099s, you can't wait too long before doing so. You have until January 31 to send the form to the recipient and to the IRS.
If you are submitting later than the deadline, don’t stress, you can send the forms late, but you'll owe a $50 penalty per return. That means if you hired 10 freelancers, you'd owe $500 if you file between February 1 and March 2 (March 1 in a leap year).
Because of this strict timeline, it helps to have a service complete the forms for you. Then, you can focus on other aspects of running your music business.
Why 1099s Matter
I don't think there's a single person in the world who likes paying taxes. However, you gotta do it, even when a lot of your income comes from freelance gigs. You may not even have to worry about creating 1099s for a while, but starting to do this process now will only help you with your own taxes. Consult with your accountant and find out what is considered something that can be written off.
Filling out and mailing the 1099s on your own takes a lot of time. Plus, you have to keep track of a bunch of information for all of the freelancers you've hired. It could be all too easy to make a mistake on one of the forms.
Why Doing Your Taxes Matters
So, you get a bunch of W-9s and send out the 1099s. But why?
Unless you're lucky enough to land a full-time symphony job or a manager, you're your own boss. That means you don't have someone taking your taxes out of your paycheck and paying the government for you.
It's your responsibility to prepare your taxes, whether you freelanced, hired other freelancers, or both. If you don't do your taxes, you could face a financial penalty.
Prepare for Next Year Now
Even if the deadline to send 1099s has already passed, you can prepare for next year. Make a plan now so that you can collect the necessary tax documents from your current and future freelancers.
Then, when next January rolls around, you won't have to stress about sending 1099s. You can find plenty of helpful resources, such as Buddisystems.
Luckily, completing these 1099s correctly can help you with your own taxes. You can deduct the cost of hiring contractors from your taxable income.
I recently took a demo with the Buddisystems team, and I was really impressed with the features. The program makes it super easy to track tax documents and pay freelancers. And it's just as easy to get paid with their digital wallet and transfer that money to my bank account for free.
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