What Is A 1099 Form and How Do I File Taxes With It?
Most people are familiar with W2s, but you may have also received a 1099 form this year. If you did contract or gig work last year you probably got one. Many people also got a 1099-G for the first time, as the U.S. reached high levels of unemployment last year and many people claimed unemployment insurance for the first time.
If you received a 1099 and don’t know what to do with it, or if you are thinking of taking a 1099 job and don’t understand what that means, we’ve got you covered.
What is a 1099 Form?
A 1099 form is a record that a business, entity, or person other than a traditional employer paid money to you. The payer fills out the 1099 form and sends copies to you and the IRS. They are commonly used to record payments sent to freelancers (1099-NEC, previously 1099-MISC), dividends paid out (1099-DIV), debt canceled (1099-C), and government payments such as unemployment insurance (1099-G). There are different versions of the 1099 form for each of these purposes.
The IRS recently rolled out the 1099-NEC, a 1099 form specifically for paying freelancers and contract employees. In prior years, these non-employee workers were sent 1099-MISC forms, the catchall 1099 form.
When discussing 1099s or 1099 jobs, the 1099-NEC sent to freelancers is what people are usually referring to. It is essentially the independent contractor equivalent of a W2. You use it to file your taxes at the end of the year.
1099 vs. W2
W2s are the tax forms sent out to employees each January with records of the amount paid and taxes withheld for the prior year. These are the forms you are likely familiar with if you’ve held a job before.
1099s serve the same purpose and arrive at the same time, except they report non-employee compensation. They also generally only include the amount paid to you. In some circumstances you can opt to have taxes withheld, such as on unemployment insurance, but companies paying contract workers generally do not offer this option.
If you are receiving a 1099, you are responsible for setting aside money for taxes. Many self-employed individuals will need to file quarterly estimated taxes as well. To find out if you need to submit estimated quarterly taxes, visit the IRS website or speak to your accountant or tax advisor.
Do all Contract Workers Receive a 1099?
If you earned over $600 in self employment or contract work income from a person or company in the prior calendar year, you will receive a 1099 from them. If you earned under $600, you will not receive a 1099, but still need to report the income. The 1099 form is not required in order to report income, unless there was tax withheld.
How Do I File A 1099 On My Taxes?
You can file your 1099 income with whatever provider you normally file your taxes with whether it be an online service, CPA, or tax advisor. They will direct you to fill out a Schedule C Profit and Loss Statement detailing your 1099 income and any expenses you incurred while earning it such as mileage, business equipment or supplies you purchased, or other business expenses. Be sure to keep receipts for your business expenses and track your mileage throughout the year. To learn more about self employment taxes and business expenses, see TurboTax’s guide or consult a tax professional.
Engaging in 1099 Work
There are a lot of benefits that come with working as a 1099 contractor. You typically have more flexibility and control over how, where, and when you complete work. If you plan to engage in 1099 work this year, be sure to track your expenses and engage in proper tax planning.
If you’re ready to hop into the flexible and rewarding world of contract work or find another avenue to find gigs, become a Faveo helpmate! We are accepting new team members now. Submit an application here.
If you’re looking to hire contract workers, Faveo also has you covered.Finding on-demand labor for your business shouldn’t be a hassle. Faveo makes hiring short-term help easy so you can operate with flexibility and efficiency.
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