Due to last year's audit, I now know that self-employed people and businesses must file 1099 forms to anyone whom they pay more than $600. Every consultant, your landlord, and the person who cleans the office. Since I own my office and don't pay rent, I sent three 1099's, one to the office cleaning person, one to my consultant, and the other, in my business as landlord, to the contractor who rebuilt a floor for me.
Why 1099's? The IRS wants to be able to know if your payees, the consultant and your landlord, are declaring all their income.
How 1099s? You want the 1099-Miscellaneous Income (or 1099-MISC) form. They come 2 to a page. I always ruin one by putting my consultant's name where mine should go. Read carefully. And you need to get the tax i.d. or social security number of every payee. Which, unless they're working under the table, they'll be glad to give you. Put the $ amount in the appropriate square (Probably not "crop insurance proceeds"). When you've filled them out, send the top layer to the IRS, one of the middle ones to the "recipient" and file the rest in your file. When you send the top layers, they need to go with form 1096, which just has the total. After you've done this once, the IRS sends you a pre-printed form.
To get forms call the IRS at 1800-829-3676 or go to www.irs.gov
If you don't do this, and you get audited, it will cost you for every audit year and every form. I know this the hard way. It will take you about an hour total, to figure it out. So order the forms, get the Social Security #'s, and start figuring out who you paid what in 2010.