I just want to make sure I'm on the right track with this. I have a new artist client (Schedule C in 2017 and LLC in 2018) and he produces art pieces with the help of several sub-contractors. He has grouped several payments to sub-contractors in one category. I've reviewed his P&L for the past two years.
I've separated them into the following:
social media/PR-selling expense
general labor- office help
Question is: I will need to issue 1099s to these individuals (over $600) in January, correct?
LLC means nothing for taxes, he is either a sole proprioetor for taxes or some other business type.
You can not have a sub contractor that works in the business, by definition a sub contractor has his own business and works for himself
see the attachment, the IRS is hot on this
If you pay a contractor over $600 a year in cash or checks or inventory, then yes you report it on a 1099-misc at year end. Payments made by CC or paypal, etc are not reportable by you.
It's a fair and very important question. @Rustler brings up a key point - by definition, a sub-contractor cannot be part of your clients' business. There's been a lot of change here in California about what defines a "contractor" in the gig economy - Money Magazine did a good piece. If there's any ambiguity, I'd talk to your client to make sure he isn't treating them as employees as this can have some very significant tax implications.
You're asking at a very good time though since tax season is so far away. Do you know to set up these contractors as Vendors in QuickBooks?