Compliance

What Is a 1099 Form?

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July 21, 2020
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If you are working as a freelancer or independent contractor, then you will most likely receive a 1099 form from the US companies you are working with (most likely a 1099-MISC). 1099-MISC form is used as a report to the IRS on exactly how much a company has paid you in the last tax year as a non-employee.

Who is an Independent Contractor?

According to the Internal Revenue Service (IRS), you are eligible for a 1099-MISC when you are not a direct employee, but work as an independent contractor and perform services for a company. As an independent contractor, you have the right to control what you work on and how the work will be performed. Your client can “control or direct only the result of the work.” As an independent contractor, your earnings are subject to Self-Employment Tax.
Here are some examples of the work performed by independent contractors:

  • ‍Freelance web developer
  • Self-employed accountant
  • ‍Marketing consultant

Not sure if your service provider is an independent contractor or an employee? Take a look at this article.

1099-MISC Forms and Taxes

The United States government requires that companies send their independent contractors' 1099-MISC forms by January 31st, indicating the income paid to each contractor over the prior year. If a company has paid an independent contractor less than $600 over the course of the year, they do not need to send the independent contractor a 1099-MISC, but the independent contractor still has to account for the income.

As independent contractors are not direct employees, the company does not pay a percentage of their taxes or have it withheld from their payments. If an independent contractor owes more than $1,000 to the IRS for the current tax year, the contractor also needs to submit quarterly tax payments. In that case, the independent contractor needs to estimate their tax liability based on the most recent quarter and use a 1040-ES form to make payments.

1099 Filing on Deel

At the end of the year, both clients and contractors will be able to generate and file the 1099 form and file it directly to the IRS using Deel. We will provide more information towards the end of the year. If you want to learn more or have a question, feel free to write us via our website chat.

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