Do I need to file a 1099 form for contractors associated with hobby income?
You are expected to file 1099 for each person you pay $600 a year. I.e.: not a one time payment, but the total over the course of the year. Since we don't know how much and what else you paid - we cannot answer this question. The real question you're asking is that if you're treating the enterprise as a hobby, whether you're supposed to file 1099s at all. The answer to that question is yes. You should talk to your tax adviser (a EA/CPA licensed in your state) about this, and whether it is the right thing for you to do treating this as a hobby at all.
"Thinking about the business overall, your ""profit"" would be: Since this is a sole proprietorship, the taxes are going to depend on your marginal tax rate. If you file jointly, your income will determine what your marginal tax rate is.  If you file separately, there likely wouldn't be any tax on that income since it's less than the standard deduction, but you lose benefits of filing jointly (combined exemptions, etc.) So think about how much she would charge, what expenses are involved (before taxes), what the taxes would be on that profit, and what the ""opportunity costs"" are - is it worth time away from the kids/hobbies/etc. for that hobby? How much should a hobby business make to make it worth the effort of charging for such services? That would fall in the ""expense"" section.  Are you talking about the actual costs (tax prep, etc.) or just the hassle of collecting, accounting, etc.  Certainly those are a consideration but it's harder to quantify that.  If you can come up with some sort of cost then certainly it would fit in the overall value equation. I'm not sure using additional Social Security benefits as a gauge is helpful, since you wouldn't see those benefits until you're of retirement age (according to SS) and a lot can happen between now and then." I'm not a tax advisor, but I've done freelance work, so... If any of your side-business revenue is reported on a 1099, you're now a business owner, which is why Schedule C must be filled out. As a business owner, minimum wage doesn't apply to you. All revenue is income to you, and you owe taxes on the profit, after subtracting legitimate (verifiable) business expenses. You'll want to talk to a real tax advisor if you're going to start expensing mileage, part of your house (if you use a home office), etc. Don't forget that you'll owe self-employment tax (the employer's half of your payroll tax).  You can't save money on business taxes by paying yourself a wage and then counting it as an expense to the business. You'll definitely want to talk to a tax expert if you start playing around with finances as an (the) owner of the business. Income that is not reported on a 1099 should be reported as hobby income. "Form W-9 (officially, the ""Request for Taxpayer Identification Number and Certification"") is used in the United States income tax system by a third party who must file an information return with the Internal Revenue Service (IRS). It requests the name, address, and taxpayer identification information of a taxpayer (in the form of a Social Security Number or Employer Identification Number). A W-9 is typically required when an individual is doing work, as a contractor or as an employee, for a company and will be paid more than $600 in a tax-year.  The company is required to file a W-2 or a 1099 and so requests a W-9 to get the information necessary for those forms. I cannot say if it is incompetence on the part of the accounting department or a deliberate ploy to make the refund process more onerous, but do not comply.  Politely nsist on a refund without any further information.  If the company refuses, request a charge-back from the credit-card company, file a complaint with the consumer-protection department of the state where the company is located, and write a bad review on Yelp or wherever else seems appropriate." You are correct that you do not need to file under a certain circumstances primarily related to income, but other items are taken into account such as filing status, whether the amount was earned or unearned income (interest, dividends, etc.) and a few other special situations which probably don't apply to you.  If you go through table 2 on page 3 and 4 of IRS publication 501 (attached), there is a worksheet to fill out that will give you the definitive answer.   As far as the 1099 goes, that is to be filed by the person who paid you.  How you were paid (i.e., cash, check, etc., makes no difference).  You don't have a filing requirement for that form in this case. https://www.irs.gov/pub/irs-pdf/p501.pdf As littleadv says, if you're a sole proprietorship, you don't need to file a 1099 for money you pay yourself. You certainly will need to file a schedule C or schedule E to report the income. And don't forget SE to pay social security taxes on the income if you made a profit. If your company is a corporation, then -- I'm not a tax lawyer here, but I think the  corporation would need to file a 1099 for the money that the corporation pays to you. Assuming that the amount is above the threshold that requires a 1099. That's normally $600, but it's only $10 for royalties. "Re the business license - in California business licenses are given by the municipal/county governments, so you'll have to check that with your city hall or county office. Re taxes - yes, you'll have to pay taxes, as with any income. Services are considered ""imputed income"", and generally you'd recognize income to the extent they would be paying had they been paying the full price (or the actual cost of services provided, if more). Since this is a hobby and not a for-profit enterprise, your deductions may be limited by the actual income and the 2% AGI threshold. See more here." Yes, you need to include income from your freelance work on your tax return.  In the eyes of the IRS, this is self-employment income from your sole-proprietorship business. The reason you don't see it mentioned in the 1040EZ instructions is that you can't use the 1040EZ form if you have self-employment income.  You'll need to use the full 1040 form.  Your business income and expenses will be reported on a Schedule C or Schedule C-EZ, and the result will end up on Line 12 of the 1040.  Take a look at the requirements at the top of the C-EZ form; you probably meet them and can use it instead of the more complicated C form. If you have any deductible business expenses related to your freelance business, this would be done on Schedule C or C-EZ. If your freelance income was more than $400, you'll also need to pay self-employment tax.  To do this, you file Schedule SE, and the tax from that schedule lands on form 1040 Line 57. If your net profit is $0, then no, you will not owe income tax as a result of providing this service. But there's a lot more to consider than just that... Before you begin you'll need to decide if this is a business or a hobby. Based on the fact that you don't intend to make a profit, you are probably going to be calling it a hobby for tax purposes. Regardless of whether it is a business or a hobby, since you will be accepting payments from people, you will need to report the income on your tax return. As both a business and a hobby you can deduct all of your expenses to bring your profit down to $0. (Assuming all the expenses are legitimate business/hobby expenses.) The main differences between business and hobby are: If you choose to run as a business you'll likely save quite a bit of money by avoiding the 2% rule, and also by being able to deduct any non-specific-customer expenses and take a loss. Be careful though that you don't go too many years with a business loss or the IRS may re-classify it as a hobby, which may include an audit. If you decide to run as a business you may need to charge a little more than just expenses to attempt to turn a profit, or at least break even. You do not need to file 1099-MISC to yourself if you're running as a sole proprietor - you are yourself. However, you do not deduct this amount from your business income and report it as royalties either. Your self-published book is your business income subject to SE tax. You can only deduct the actual costs of producing/writing, and the remaining amount is your Schedule C income. You are right that even if you do not receive a 1099-MISC, you still need to report all income to the IRS.  Report the $40 on Schedule C or Schedule C-EZ.  Since your net profit was less than $400, you do not need to file Schedule SE.  From the IRS web site: Self-Employment Income It is a common misconception that if a taxpayer does not receive a Form 1099-MISC or if the income is under $600 per payer, the income is not taxable. There is no minimum amount that a taxpayer may exclude from gross income. All income earned through the taxpayer’s business, as an independent contractor or from informal side jobs is self-employment income, which is fully taxable and must be reported on Form 1040. Use Form 1040, Schedule C, Profit or Loss from Business, or Form 1040, Schedule C-EZ, Net Profit from Business (Sole Proprietorship) to report income and expenses. Taxpayers will also need to prepare Form 1040 Schedule SE for self-employment taxes if the net profit exceeds $400 for a year. Do not report this income on Form 1040 Line 21 as Other Income. Independent contractors must report all income as taxable, even if it is less than $600. Even if the client does not issue a Form 1099-MISC, the income, whatever the amount, is still reportable by the taxpayer. "My number one piece of advice is to see a tax professional who can guide you through the process, especially if you're new to the process. Second, keep detailed records. That being said, I found two articles, [1] and [2] that give some relevant details that you might find helpful. The articles state that: Many artists end up with a combination of income types: income from   regular wages and income from self-employment. Income from wages   involves a regular paycheck with all appropriate taxes, social   security, and Medicare withheld. Income from self-employment may be in   the form of cash, check, or goods, with no withholding of any   kind. They provide a breakdown for expenses and deductions based on the type of income you receive.  If you get a regular paycheck: If you've got a gig lasting more than   a few weeks, chances are you will get paid regular wages with all   taxes withheld. At the end of the year, your employer will issue you a   form W-2. If this regular paycheck is for entertainment-related work   (and not just for waiting tables to keep the rent paid), you will   deduct related expenses on a Schedule A, under ""Unreimbursed Employee   business expenses,"" or on Form 2106, which will give you a total to   carry to the schedule A. The type of expenses that go here are: If you are considered an independent contractor (I presume this includes the value of goods, based on the first quoted paragraph above): Independent contractors get paid by cash or check with no withholding   of any kind. This means that you are responsible for all of the Social   Security and Medicare normally paid or withheld by your employer; this   is called Self-Employment Tax. In order to take your deductions, you   will need to complete a Schedule C, which breaks down expenses into   even more detail. In addition to the items listed above, you will   probably have items in the following categories: Ideally, you should receive a 1099 MISC from whatever employer(s) paid you as an independent contractor. Keep in mind that some states have a non-resident entertainers' tax, which is  A state tax levied against performers whose legal residence is outside   of the state where the performance is given. The tax requires that a   certain percentage of any gross earnings from the performance be   withheld for the state. Seriously, keep all of your receipts, pay stubs, W2's, 1099 forms, contracts written on the backs of napkins, etc. and go see a tax professional." If you are freelancing, the best form for you is ITR-4. With this form you can declare your salary income as well as your expenses related to your freelancing.  And you should treat your freelancing income as business. That way you can get max deductions claimed. I took littleadv's advice and talked to an accountant today. Regardless of method of payment, my US LLC does not have to withhold taxes or report the payment as payments to contractors (1099/1042(S)) to the IRS; it is simply a business expense.  He said this gets more complicated if the recipient is working in the US (regardless of nationality), but that is not my case Such activity is normally referred to as bartering income. From the IRS site - You must include in gross income in the year of receipt the fair market value of goods or services received from bartering. Generally, you report this income on Form 1040, Schedule C (PDF), Profit or Loss from Business (Sole Proprietorship), or Form 1040, Schedule C-EZ (PDF), Net Profit from Business (Sole Proprietorship). If you failed to report this income, correct your return by filing a Form 1040X (PDF), Amended U.S. Individual Income Tax Return. Refer to Topic 308 and Amended Returns for information on filing an amended return. It makes no difference for tax purposes. If you are 1099, you will pay the same amount of taxes as if you formed a corporation and then paid yourself (essentially you are doing this as a 1099 contractor, just not formally). Legally, I don't know the answer.  I would assume you have some legal protections by forming an LLC but practically I think this won't make any difference if you get sued.