The Hitchhiker’s Guide to Freelancing: How to file 1099 Taxes This Year

There are 56.7 million freelancers in the United States. If this is your first year joining their ranks, you’re probably wondering how to file 1099 taxes.

Well, hopefully, you’ve been setting aside at least a bit of money this year to pay your tax burden. If not, well, best of luck. You can always look into the Fresh Start Program.

In the meantime, here’s everything you need to know about the 1099 Tax Forms.

Why 1099 Forms?

When you work as an employee for a company, you file a W-2 form. Your company deducts taxes from your paycheck to pay the IRS. You get what’s left. Your company pays a part of your taxes toward social security and medicare.

Then during tax season, you file papers comparing how much you paid into how much you actually owe. Hopefully, the number is close to zero.

Why don’t you want a refund? That’s because a refund means you gave the government an interest-free loan for the year. That’s money you could have spent investing and making more money. Even worse? If your refund is big enough, you can get taxed on it (again) the following year.

But since you’re making money, but you’re not an employee, you get to pay all your own taxes. You get to deduct them from your own paychecks. The best part? The amount your employer usually chips in, well, you’re the employer now. And you have to pay for that part too.

Who Uses 1099 Tax Forms?

If you make money as a freelancer, subcontractor, or gig worker, you’ll probably get a 1099 tax form. But it’s a bit more complicated than that too.

If you did work for a client and they paid you less than $600, they don’t have to file 1099 taxes. But you still have to pay taxes on that income. So hopefully you have good records.

On that note too, if you paid someone else more than $600 for a project, you have to supply them with 1099. This is for anything like proofreading or editing, website design, etc.

You don’t need to worry if you are hired through a third party resource like Upwork. If that’s the case, Upwork will take care of the paperwork.

It’s not hard to create 1099 though. Just use a simple 1099 generator like this one.

How Do I File 1099 Taxes?

If you’re using a tax software program, like TurboTax, you’ll be prompted to enter any 1099 forms.

If you’re working with a tax specialist, like H&R Block, just drop off all your paperwork.

What Should I Expect for Taxes?

As a freelancer, you should be saving 25% to 30% of each payment to eventually pay taxes. If you expect to owe more than $1000 in taxes, you need to file quarterly returns.

You’re not getting taxes taken out of a paycheck, and you have to pay self-employment taxes. So you can expect the bill to be higher than you’re used to. May the odds be ever in your favour.

Now You Know How to File 1099 Taxes

1099 is a tax form used by freelancers, subcontractors, gig workers, and the IRS. You’re not an employee. So the company you’re working with doesn’t have to pay employment taxes on your behalf.

You do. So hopefully you’ve been saving.

These tips show you exactly how to file 1099 taxes. Remember next year you need to pay quarterly taxes to avoid additional tax fines.

Keep checking back for more great tips to help you grow your business.

Dragan Sutevski

Posted by Dragan Sutevski

Dragan Sutevski is a founder and CEO of Sutevski Consulting, creating business excellence through innovative thinking. Get more from Dragan on Twitter. Contact Dragan