The Ultimate Guide to 1099 Form for Freelancers in the US

If you work as a freelancer or independent contractor in the US, you’ll need to know about the 1099 form. Unlike full-time employees who receive a W-2 form, independent contractors file their self-employed taxes using 1099s. The 1099 form shows how much money you earned from a given client in a given year and is required by the IRS for any client who paid you at least $600. The most widely used 1099 form is the 1099-MISC, which is used by companies that paid you at least $600 in income. Independent contractors also need to handle self-employed taxes, including deductions for expenses and quarterly tax payments.

What is a 1099 form?

If you’ve been freelancing long enough, you already know that your clients aren’t taking the taxes out of your paychecks. That’s why 1099 exists.

A 1099 form shows you how much money you earned from a given client in a given year. This is what the IRS calls an information return.

The IRS requires every client that paid you at least $600 to complete 1099, sending a copy to you in the process. If you’re a full-time employee at a company and have a side hustle, you could be including both a W-2 and 1099 with your tax returns. The difference between the forms is that only the W-2 shows part of your payment being withheld for tax purposes.

If you don’t receive a form from a client (or you did less than $600 in business with a client), you’ll still be required to report that income during tax season. You just won’t receive 1099 for it.

Types of 1099 forms

The most widely used 1099 is the 1099-MISC. It’s used by companies that paid you at least $600 in income.

There are other specific circumstances in which the 1099-MISC form might be required. This includes the cases of scoring taxable credit card benefits and receiving a cash bonus via a lender’s referral program. The form also covers rent, royalties, and awards.

The form itself will list your name, address, and Social Security number. It will also detail the type of work you did for the company and the amount of pay it netted you during the year.

The IRS refers to 15 different types of 1099 forms. Although you won’t need to worry about selecting your 1099 type — it’s sent to your mailbox by the payee — here are scenarios where you’ll receive some of the more common 1099 forms.

TypeExample
1099-CA lender files a 1099-C because your canceled student loan debt is taxable.
1099-DIVA bank files a 1099-DIV because your account earned significant dividends.
1099-GThe government files a 1099-G because you received unemployment payments.
1099-KPayPal files a 1099-K because you sold more than $20,000 worth of stuff on eBay.
1099-MISCAn advertising agency files a 1099-MISC because it paid you $15,000 for graphic design work.

Who needs to use a 1099 form?

Both you and your client will use 1099 forms to communicate your business to the IRS. The person or entity that pays you at least $600 must send you (and the IRS) a 1099-MISC by Jan. 31.

Even if you don’t receive 1099, you still need to report the income on your tax return. If you don’t have good records of your income from a client, you might nudge the client to file the 1099 or at least confirm how much money they paid you over the year.

Not all companies hiring freelancers will need to use the 1099 form. If you’re a freelance writer working for a publication via a freelancer platform like Upwork, for example, you only need to have a W-9 on file. Upwork, not the publication, then submits the 1099 form to you.

How do you file 1099 forms?

You should receive 1099 forms from your clients during February. All you’ll need to do from there is include them with your tax return, reporting on your other tax forms how much income you received from clients.

Say you’re a freelance designer, for example, and you receive a 1099-MISC detailing $10,000 worth of work. You’ll report that dollar figure on your 1040 form (also known as Schedule C or C-EZ).

From there, you’ll estimate your business expenses. If expenses like setting up your home office are less than your income, then you’ll be subject to self-employed taxes and income tax. Self-employment tax is levied upon independent contractors to cover Social Security and Medicare tax.

Handling self-employed taxes

The 1099 tax form is one piece of the puzzle for independent contractors. You’ll also be making deductions for expenses and planning quarterly tax payments to city, state, and federal governments.

If you’re not a fan of waiting on clients to send their 1099s every February, there’s a way to be more proactive. You might consider using Painless1099, which organizes your freelance income and sets aside a portion of each paycheck to cover your taxes.

Now that you know the answer to, “What is a 1099 form?” you can move on to more important stuff. In fact, there are plenty of money-management tools for freelancers that can make your side hustling life much easier.

In conclusion

 the 1099 form is an essential document for independent contractors or freelancers working in the US. This form is required by the IRS for any client who paid the contractor at least $600 during a given year. Independent contractors use 1099 forms to file their self-employed taxes, including deductions for expenses and quarterly tax payments. The most commonly used 1099 form is the 1099-MISC, which is used by companies that paid the contractor at least $600 in income. Although receiving a 1099 is necessary, even if a contractor does not receive one, they still have to report their income during tax season. Moreover, there are various types of 1099 forms that depend on the circumstances, and the IRS has 15 different types of 1099 forms. Lastly, contractors can use various tools to help manage their taxes and income, making their work easier.

FAQ

What is a 1099 form?

A 1099 form shows how much money you earned from a given client in a given year and is required by the IRS for any client who paid you at least $600.

What types of 1099 forms are there?

There are 15 different types of 1099 forms, but the most widely used is the 1099-MISC, used by companies that paid you at least $600 in income.

Who needs to use a 1099 form?

Both you and your client will use 1099 forms to communicate your business to the IRS. The person or entity that pays you at least $600 must send you (and the IRS) a 1099-MISC by Jan. 31.

What happens if I don’t receive a 1099 form?

If you don’t receive a form from a client, you’ll still be required to report that income during tax season.

How do I file 1099 forms?

You should receive 1099 forms from your clients during February. All you’ll need to do from there is include them with your tax return.

What is the difference between a W-2 and a 1099 form?

Only the W-2 shows part of your pay being withheld for tax purposes. Independent contractors file their self-employed taxes using 1099s.

Do all companies hiring freelancers need to use a 1099 form?

Not all companies hiring freelancers will need to use the 1099 form. Freelancer platforms like Upwork, for example, only require a W-9 on file.

How do I handle self-employed taxes?

Independent contractors need to handle self-employed taxes, including deductions for expenses and quarterly tax payments to city, state, and federal governments.

What is self-employment tax?

Self-employment tax is levied upon independent contractors to cover Social Security and Medicare tax.

What are some money-management tools for freelancers?

Painless1099 is an option that organizes your freelance income and sets aside a portion of each paycheck to cover your taxes. There are plenty of other money-management tools available for freelancers.

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