What To Know Before Filing Your 1099 Tax Form

Is your boss giving you a 1099 this year, and not a W-2? Anyone who has ever been an employee has probably gotten a W-2 tax form in their life. When you get a W-2, your employer should have already withheld any federal and state income taxes. However, a 1099 form is different. The 1099 form is what employers, or clients, give to independent contractors that they have hired. Independent contractors are workers that, as the name suggests, have some independence from who is paying them.

If you hired someone to do work on your house, that person is probably an independent contractor, not your employee. Gig economy jobs, like rideshare driving, might be considered independent contracting jobs. (Keep in mind that Independent Contractors can hire workers who might be considered employees, so don’t assume you’re an independent contractor because your boss is one.) The IRS considers independent contractors to be self-employed – but they still have to pay income taxes on what they earn, even if they don’t receive a 1099. Unlike with a W-2, if you receive a 1099, or if you don’t receive any form, then the person paying you has NOT taken out the income taxes YOU need to pay.

If you have self-employment income, like that income which is reported on a 1099, then you are expected to make quarterly Estimated Tax Payments at four times during the year. If you don’t, then not only will you have a large tax bill at the end of the year when you file, you will also have interest and penalties to pay for not paying on time. They are called “Estimated” payments because you are the one calculating how much you think you owe. For specific instructions on how to calculate this, and how to pay, read IRS Publication 505 (2023), Tax Withholding and Estimated Tax, available on the IRS Website.