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THE COMPLETE GUIDE FOR FREELANCERS TO:

IRS Form 1099

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Wondering what to do with the 1099 Form you received?

As a freelancer, gig worker or a self-employed person, a 1099 tax form is sent to you because you earned money from a non-employee source. There are a variety of 1099 forms, and it's useful to know a little about each. But the fundamental thing about a 1099 form is that it’s an information sharing form. It’s sent to the IRS by a company paying a self-employed individual for contract work or a product. The company will also send it to a self-employed individual for information purposes. For a self-employed individual, a 1099 form is not a required form to file the federal tax return but it does help you fill in your Schedule C accurately. Key Highlights: • A 1099 form is an information sharing form • A 1099 form reports payment information to the IRS by a company or individual that paid another individual for non-employee contract work • A 1099 form has many different version, used to report different kinds of income information

Here’s what the Form 1099 NEC looks like:

Image of Form 1099-NEC for reporting nonemployee compensation and direct sales. Includes payer and recipient information, taxes withheld, and state tax details.

The IRS 1099 Form is a way of reporting certain types of income. This important tax document details any earnings you received outside of the salary paid by an employer to the IRS. This practice promotes taxpayers to pay taxes on any income they made from contract work. For example, if you run a side hustle or are self-employed, you must pay and file taxes for this income. The IRS is informed by companies and third-party payment organizations like Venmo or PayPal, if they make payments to freelancer or independent contractors exceeding a certain threshold. For the 2024 tax year, this threshold for third-party payment companies is 1 or more transactions and $5,000. The IRS has decided to delay the implementation of the lower $600 threshold to 2024. As we all know, nothing is straightforward regarding the IRS. Since there are many ways to earn additional income, there are different types of 1099 forms that report different types of income. This article will help you understand everything you need to know about the 1099 tax form including what is a 1099 form, who gets a 1099 and how to get a 1099 form.

Table of contents

What is Form 1099?...Read more

What is the 1099 Form used for?...Read more

Criteria for getting a 1099 form and paying taxes on it...Read more

Types of 1099 Forms...Read more

What to do if you don’t get Form 1099?...Read more

How do you calculate taxes on 1099?...Read more

1099 benefits for different professions...Read more

What is Form 1099?

The 1099 tax form by the Internal Revenue Service (IRS) used to report certain income received during the year. Essentially this tax document is an information reporting form because it reports your income information to the IRS. This is the 1099 form an independent contractor or self-employed person uses.

Image explaining Form 1099, which reports income to the IRS. Sent by clients like Door Dash, Uber, Postmates to self-employed/freelancers for tax purposes.

This form is essential because it reports income that typically does not come from your employer, meaning any non-employee income earned. The IRS matches all 1099 and W-2 forms against your 1040 tax forms. If the IRS checks and the forms do not match, they will send out a CP2000 notice to you stating that you owe more money. A few examples of income outside a full-time job are income when you sell your used items on eBay, income from streaming on platforms like OnlyFans, Twitch, income from selling goods on Etsy, income from rent or interest.

What is the 1099 Form used for?

Simply put, the 1099 tax form reports income to the government. Since there are many different types of incomes and ways that income is taxed, the IRS provides several versions of 1099 tax forms for each type of income. These forms help freelancers know what income to report for the tax year. For example, the Form 1099-INT is used to report income from dividends or stocks, earned interest of more than $10 and any money received from the government or real estate transactions.

Quick tip

If you don’t get a 1099 form by February even after expecting one, you can simply refer to your bank statement to find the taxes you owe.

Criteria for getting a 1099 form and paying taxes on it

You might be wondering how to get a 1099 form and when 1099 forms are issued. Some taxpayers receive Form 1099 in the mail, usually in February. If you expected a 1099 form but haven't received it from the client, you can contact them or report the taxes on your own. If you paid someone for contract work and want to report those payments to the IRS you can go to your local office supply store or accounting firm to get these forms. The forms are also available on the IRS website. There are different criteria based on who gets a Form 1099. For example, you might get a 1099 Form in the mail if you:

Image describing when to expect a Form 1099 in the mail. Keywords: employment compensation, royalty payments, rent payments, state tax refund.

What is non-employee compensation anyways?

Non-employee compensation is when you receive compensation income from a source different from your employer. This could mean driving an Uber as a side gig or writing a freelance article for a magazine or blog as a freelancer. According to the IRS, you must report any payments if you meet these requirements:

Earned more than $600 in employment compensation from a business or person that is not your employer
Earned more than $600 in royalty payments or rent
Received a local or state tax refund during the previous year

Image describing IRS rules for reporting payments made to non-employees on 1099 form. Includes criteria such as payment amount, recipient type, and business relation. #taxes #1099 #selfemployed #freelancer

Some payment examples include cash prizes (lottery winnings), tax dividends, credit card debt, state tax refunds, interest income, a sale of your personal property and IRA distributions.

Types of 1099 Forms

Understanding 1099 tax forms can be challenging. There seem to be countless forms, each with very different instructions and criteria. There are over twenty different types of 1099s! But don’t panic; only a few are essential for you to know and understand.

Form 1099-NEC

The most popular IRS form1099 is the 1099-NEC. For the 1099 Form, independent contractors or self-employed contractors report when they have received $600 or more in compensation for the year. The IRS uses this information to verify your income, which is applied to determine your federal income tax level. As an independent contractor, you do not have to file the 1099-NEC. However, you should receive a copy of this from your client. If you do not receive one from your client, it is important to request one. Even if the income falls below the range of $600, you are still required to report your income on Schedule C.

Form 1099-MISC

The Form 1099-MISC reports any payments made for your trade or business. This does not include non-employee compensation or payment made by your employer. As a self-employed freelancer or independent contractor, you may receive Form 1099-MISC and be required to file. However, this will depend on your business or trade type and activity. Typically though, you will use the Form 1099-NEC for reporting non-employee compensation in exchange for services provided. Usually, landlords will need to file the 1099-MISC to report any payments made to contractors, attorneys, property management, maintenance contractors, and anyone else who carried out work on the property but was an employee. This would require you to report where your payments exceeded $600 or more.

Form 1099-K

Form 1099-K is a tax form that gets filed alongside your individual income tax return. This form is unlike other varieties of the 1099 Forms because its purpose is for payments received through a third party or a transaction by a credit or debit card. We consider a transaction made by a credit or debit card as a payment settlement entity. Therefore, you will need to report those transactions for the year on the Form 1099-K. This form reports third-party app payments. If you received a payment through apps like Venmo, Shopify or Paypal, the apps are going to send a 1099-K to the IRS.

Image with text listing questions related to online selling, ridesharing, and accepting card payments. Mentions possibility of receiving Form 1099-K for tax purposes. #selfemployed #taxes #1099

Form 1099-INT

The Form 1099-INT is a tax form used to report interest income. It works as a record to show that a person or entity paid you interest during the tax year. You would receive the Form 1099-INT if you received interest amounting to more than $10 from a brokerage, bank, or other financial institution.

For example, if you received interest from a bank on your savings account, you would need to report this on your 1099-INT in section 1. However, if you receive this form, it does not always mean that you will owe taxes on that money. You may have other deductions that offset the income. Since this form has your Social Security number listed, the IRS will know that you received interest. So be sure to report this income on your tax return and save yourself from any trouble.

What to do if you don’t get Form 1099?

Typically, you should receive your 1099 tax form in the mail in early February. In some cases, you might not receive your 1099. If you didn’t receive a 1099 form even after you satisfy a criteria don’t panic. You can simply refer to your bank statements. It’s better to report the income on your own. It might require some work by going through your bank accounts, profit and loss statements and possibly any cash tips you’ve earned. Then enter this information on your Schedule C. You can use FlyFin to find your income and expenses automatically in minutes.

How do you calculate taxes on 1099?

The taxes on your 1099 income is calculated like any other income. You just add up all the income from different sources and then check your income tax bracket. You can use IRS tax rates for different income brackets to find your tax liability. This is from your income tax only, but if you are a self-employed individual, you also have to pay Self-Employed Care Act (SECA) tax. There are different due dates for this tax throughout the year. These estimated taxes are due quarterly, or four times a year. As someone self-employed, it is your responsibility to pay the self-employment tax. Usually, employers split the 15.3% rate, where the employer pays half and the employee pays the remaining half. However, as a freelancer, it’s now your responsibility to pay the 15.3% in its entirety. The good news is that only your net earnings are subject to self-employment taxes. This means your gross income minus any business write-offs. You can also deduct 50% of the total SECA tax from your income to further lower your taxable income. This is because the employer's share can be marked as a business deduction. A self employment tax calculator can help you figure out exactly how much SE tax you'll owe.

Image shows a tax summary with total tax of $21,473. It includes federal income tax, state income tax, and self-employment tax. Relevant for self-employed, 1099, and freelancers.

Calculating the total tax amount on your own is a long process, but get help with deductions by using a 1099 Tax Calculator to calculate your taxes for you.

1099 benefits for different professions

While working as a freelancer, you can take advantage of tax deductions to reduce the amount of taxes you owe. You can also use different tactics to lower your tax liability, also permitted by the IRS. For example, if you contribute more to a retirement savings plan, you can reduce how much self-employment tax (Social Security and Medicare) you owe. In addition, independent contractors may qualify for certain tax deductions that can lower their tax bill. Deductible expenses include home office expenses, business travel expenses and office supplies. Also, 1099 contractors are allowed additional tax deductions called a 20% pass-through deduction, enabling you to deduct 20% of qualified business income.

1099 and Taxes: A Guide for Self-Employed Individuals with 1099 Income

Taking care of your taxes as a self-employed person can be a difficult undertaking. The Internal Revenue Service (IRS) defines a self-employed person as someone earning income from an independent economic activity and is responsible for collecting self-employment taxes. Knowing how to manage self-employment tax and 1099 income is one of the most important things. We will explore the complexities of self-employment tax, its computation techniques, and ways to reduce your tax liability in this post.