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Don't Pay Full Tax For Subcontractors

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Q I headed up a freelance-consulting project last year in which I subcontracted out part of the work. Now  I’ve received a 1099 for the full amount paid for the project. Do I have to pay tax on the whole amount? L.W.C., Modesto, Calif.
A In effect, no. Treat your business project as a self-employed business and file a Schedule C for 2005. On Schedule C, you can deduct the amounts you’ve paid to the subcontractors, thereby reducing the taxable amount to the portion representing services you provided yourself. Doing this will also allow you to deduct other business-related expenses that will further reduce your overall tax liability. Tip: As a self-employed business owner, you must provide a 1099 Form to any subcontractor to whom you’ve paid $600 or more for the year. Read the instructions at for details.

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