What is a 1099 Form?
A plain-English explanation of what a 1099 means and what to do when you get one.
By the Easy Guides Editorial Team
The plain-English answer
A 1099 is an IRS information return, a form that tells the IRS (and you) that someone paid you money during the year. Unlike a W-2, which reports wages from an employer with taxes already withheld, a 1099 reports income where no taxes were withheld at all.
Receiving a 1099 means you're responsible for calculating and paying your own taxes on that income, including both income tax and, for self-employment income, the self-employment tax (15.3%).
Who receives a 1099?
- Freelancers and independent contractors, anyone paid $600 or more for services
- Gig economy workers, Uber, Lyft, DoorDash, Upwork, Fiverr, etc.
- Landlords, rental income in certain circumstances
- Investors, interest, dividends, and capital gains distributions
- Anyone who won a prize or award over $600
- Retirees, Social Security, pension, and retirement account distributions
What the 1099 means for your taxes
When you receive a 1099, the payer has also sent a copy to the IRS. The IRS will match it against your tax return, so the income must be reported, even if you don't receive a 1099 for it (under $600, for example).
For freelance and contractor income (reported on a 1099-NEC), you'll owe:
- Federal income tax, at your marginal bracket rate, on net profit (after deductions)
- Self-employment tax, 15.3% on 92.35% of net self-employment income
- State income tax, varies by state
What to do when you receive a 1099
- Verify the amount is correct. Compare it to your own records. Contact the payer immediately if there's a discrepancy, corrections must be made before you file.
- Calculate what you owe. Use our 1099 tax estimator to get your income tax and SE tax estimate.
- Check if you owe quarterly payments. If you expect to owe $1,000+ in taxes, you should be making quarterly estimated payments. See our quarterly taxes guide.
- Identify your deductions. Business expenses reduce your taxable income. Use our deductions checklist to make sure you're not leaving money on the table.
- Report it on your tax return. 1099-NEC income goes on Schedule C. Most other 1099 income has its own schedule or line on Form 1040.
What if you didn't receive a 1099?
You're still required to report the income. The $600 threshold applies to payers, they only need to send a 1099 if they paid you $600 or more. But you must report all income regardless of amount, even if no 1099 was issued.
Common questions
What is a 1099 form?
A 1099 reports money you were paid by someone who is not your employer. No tax was withheld from it, so the income and the tax are both yours to handle when you file.
Who gets a 1099?
Independent contractors, freelancers, and gig workers paid $600 or more by a client in a year, plus people with certain other income like interest, dividends, or retirement withdrawals.
Do I owe tax on 1099 income?
Yes, and usually more per dollar than on wages. You owe federal income tax plus 15.3% self-employment tax on your net profit, because no employer paid half of your Social Security and Medicare.