When businesses contract your services, they will send you a 1099 Miscellaneous Income form if they pay you $600 or more for your work. A business also should send you a 1099-Misc form if you earned $10 or more in royalties, such as those earned from book sales, as of publication. You should receive the form by mail in time to file your taxes.
Calculating Your Profit or Loss
Form 1040, Schedule C, Profit or Loss From Business allows you to deduct business expenses incurred throughout the previous year. Common business expenses include office supplies, business card printing and equipment purchases. Compile your receipts and other documentation to verify these expenses.
To determine your net profit or loss, subtract your expenses from the total amount of miscellaneous income you earned listed on the 1099-Misc. After completing Schedule C, transfer the net profit figure to your Form 1040, where you can add the figure to your total income for the previous year.
You must report the income documented on your 1099-Misc form to the IRS. Failure to do so may result in penalties.