How to File Taxes With 1099 Tax Form

If you're a 1099 worker, your tax life is very different than that of employees. It's vitally important to understand how to file your taxes when you're a 1099 worker, or you can end up in big trouble with the IRS. Here's how to file taxes with 1099 tax form.

What is a 1099 tax form?

The IRS refers to the 1099 tax forms as "information returns" which document income you receive that doesn't come directly from an employer. 1099 tax forms include the 1099-MISC, which shows income you've received from your self-employed businesses. Other 1099 tax forms can show dividends, interest payments, government payments and more.

How to file taxes with 1099 tax form

Remember, 1099 workers are independent contractors, not employees. Independent contractors are treated very differently from employees for tax purposes.

For one thing, no taxes are withheld from your pay. Employers must withhold federal and state income tax, as well as Social Security and Medicare tax, from their employees' pay and send it the IRS and state tax agencies.

Instead of having their tax withheld, 1099 workers must pay estimated taxes four times per year directly to the IRS and their state tax agency (see below). 1099 workers can deduct any necessary expenses related to their business. Employee's work-related deductions are severely limited.

Some deductions available to 1099 workers may not be taken by employees. 1099 workers ordinarily file more complex tax returns than employees because they must list their business income and expenses in a separate tax schedule.

What taxes do 1099 workers have to pay?

Your taxes will consist of income taxes, and Social Security and Medicare taxes (also called self-employment taxes when paid by 1099 workers).

The vast majority of 1099 workers are sole proprietors. A sole proprietorship is a one-owner business. The business owner (proprietor) personally owns all of the assets of the business and controls its operation. If you're running a one-person business and haven't incorporated or formed a limited liability company, you're automatically a sole proprietor.

When you're a sole proprietor, you and your business are one and the same for tax purposes. Businesses that are sole proprietorships don't pay taxes or file tax returns directly. Instead, you must report the income you earn or losses you incur on your own personal tax return, IRS Form 1040, which is due each year by April 15. If you earn a profit, the money is added to any other income you have.

How much money do you have to make to get a 1099?

Your payer should provide you a 1099 tax form if you've earned more than $600 a year. Even if you never receive a 1099 tax form, you must report your payments on your tax return.

Do you pay more taxes if you get a 1099?

It depends mainly on how much income you're making. A 1099 worker doesn't have money withheld from pay for taxes but they still owe income and self-employment tax on those wages. The new tax law provides some relief for pass-through small businesses, which may net out to a lower tax rate.