TL;DR

A 1099 is the tax form your clients send you (and the IRS) to report what they paid you as a contractor. Unlike a W-2, no taxes are withheld — you're responsible for paying them yourself through estimated taxes and your annual return.

Key Points

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Clients who pay an [[independent-contractor]] $600 or more in a calendar year must issue a 1099-NEC by January 31 of the following year

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You owe taxes on all self-employment income, even if you don't receive a 1099 for payments under $600

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Form 1099-NEC covers non-employee compensation; Form 1099-MISC covers rent, royalties, and other miscellaneous income

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Always cross-reference 1099s you receive against your own records — errors in clients' 1099s can cause IRS matching problems

How 1099 Forms Work

When a business pays a Freelancer or Independent Contractor $600 or more in a year, they're required to file Form 1099-NEC with the IRS and send a copy to the contractor by January 31 of the following year¹. This alerts the IRS that the income exists and allows them to match it against the contractor's tax return. You must report this income on Schedule C of your personal tax return, where you also deduct your business expenses to arrive at your taxable net profit. The IRS receives a copy of every 1099 issued — reporting less income than your 1099s document is a significant audit risk.

1099-NEC vs. 1099-MISC

The IRS revived Form 1099-NEC (Non-Employee Compensation) in 2020 to replace Box 7 of the 1099-MISC for contractor payments. Today: use 1099-NEC for payments to freelancers and contractors for services. Use 1099-MISC for rent, royalties, prizes, legal settlements, and other miscellaneous income. As a contractor, you'll primarily receive 1099-NECs. As a business owner who hires contractors, you issue 1099-NECs. Before you can issue a 1099, you need the contractor's taxpayer information — collected via Form W-9 before or at the start of the engagement.

What to Do When You Receive a 1099

When your 1099s arrive in January, compare them against your own income records. If a 1099 shows more income than you actually received, contact the issuing company to correct it before they file with the IRS. Report all 1099 income on Schedule C — don't wait for a 1099 to report income; all self-employment income is taxable regardless of whether it generates a 1099. After deducting your business expenses on Schedule C, the resulting net profit is subject to Self-Employment Tax and income tax. Keep copies of all 1099s you receive for at least three years in case of an IRS inquiry.

References

IRS — About Form 1099-MISC, Miscellaneous Information ↗

irs.gov

IRS — Self-Employment Tax (Social Security and Medicare Taxes) ↗

irs.gov

Last updated: June 9, 2026

Related Terms

W-9 Form

An IRS form used to provide a taxpayer identification number (SSN or EIN) to a client or business that needs to report payments to the IRS via a 1099 form.

Self-Employment Tax

A US federal tax consisting of Social Security and Medicare contributions that self-employed individuals must pay, covering both the employee and employer portions typically split in traditional employment.

Independent Contractor

A self-employed individual or business that provides services to clients under a contract, without being classified as an employee of the engaging organization.

Estimated Tax

Advance tax payments made by self-employed individuals throughout the year to cover federal (and often state) income taxes and self-employment taxes, in the absence of employer withholding.

Business Expense

A cost incurred in the ordinary course of running a business that may be deductible from taxable income, reducing the total tax owed.

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