A company makes a payment to an individual, must it then pay taxes for it? (#2)?

this is a more specific variation of a similar question I asked before:





Situation: there is an online social network that raises money from online ads, like the Google AdSense ones. It pays its best users 50% of the revenue that comes from those ads; this is a commitment stated in the T%26amp;C, not just a random gift or prize, and we are not talking about "customers" but plain site users.





- Will the company have to pay taxes for this payment? Can it deduct them? What are the thresholds?





- And as for the individual, must he/she pay taxes for this income? If he/she decides to use it for charity purposes, can he/she deduct them?





This example applies for a US-based, legitimate and audited company.





thanks in advance!

A company makes a payment to an individual, must it then pay taxes for it? (#2)?
1. The individual is required to pay taxes, but most do not, if the amount is small.


2. If any one person receives at least a certain amount, then the company must give that person and the IRS a 1099 form showing the amount of paid to that person and that person's social security number. If this occurs, then the person must report the income and pay tax, because the 1099 ensures that they will get caught if they do not.


3. If the person donates to charity and itemizes (files a Schedule A instead of taking the standard deduction), then donations to charitable organizations (not individuals) can be deducted. If the person takes the standard deduction or gives the money to individuals, then there is no deduction.
Reply:The company should have asked for proof of identity and SSN BEFORE issuing payments.





In the US, to deduct the payments, they need this information and should report the money to the person getting it on a 1099-Misc.





Whether or not the recipient gets a 1099-Misc, this is SELF-EMPLOYMENT income and needs to be reported. After paying the taxes, it's great if they want to donate the money, but that's after, not before.