From Alan: “When hiring authors at Elance or Rentacoder, do I need to worry about a 1099 or anything for them? ”

Good question. The simplest answer is “It depends.”

Probably the two biggest providers of content writers that I know of (and use) are Elance and Rentacoder. After digging into their help sections, it can be discovered that they have two different policies when it comes to 1099-MISC filing.

The Rentacoder policy can be found here. Here’s the relevant section:

5) I am a U.S. business or citizen. Do I have to mail yearly IRS 1099 forms to all coders I hire?

No you don’t. In the offline world, this is a time consuming process for most U.S. businesses. But on Rent A Coder we handle this thankless task for you. Per IRS rules, we automatically issue all U.S. coders who made $600 or more in the past year an IRS 1099 form at the proper time of the year. That gives you one less thing to worry about.

So if you use Rentacoder, then they issue the 1099’s. For purposes of your own expenses and documentation, your payments to coders through Rentacoder should be expensed as payments to Rentacoder for the respective job. Because Rentacoder is a company, you don’t need to worry about issuing them a 1099-MISC.

For Elance, their policy can be found here. Elance doesn’t manage any 1099’s, so you’ll need to handle those.

If you’ve paid any contractor less than $600, than you don’t need to worry about sending them a 1099-MISC. However, if you’ve paid them $600 or more over the year, this information will need to be documented on a 1099-MISC and sent to the contractor and IRS.

Regardless of which service you use, don’t forget that you can write-off the expenses you pay to authors. Depending on the service you use, this should be be documented as a payment to a company (for jobs posted on Rentacoder) or to an individual (for jobs posted on Elance).