Whether or not you do your own taxes, you should be familiar with the required forms, especially those that differ from a standard individual tax return. IRS Form 1099-MISC may be the most obvious way a freelancer’s taxes differ from the norm; if you’ve spent much time in the employment form, you’ll be used to the W-2 form, which employers use to report all sorts of things (your income, taxes withheld, Social Security, etc.). However, as an independent contractor on any given project, you’ll need a Form 1099 instead. Technically, the company paying you is responsible for filing a 1099, but you’ll need to fill out at least part of it.
The IRS determines independent contractor status based on the following:
- behavioral control
- financial control
- relationship of the parties
However, generally, if you think you are an independent contractor, you are. More information is available on the IRS website.
It is also important to note that you may not need to complete a 1099 for every business you worked for — only those that either paid you $600 or more, or made payments of $10 or more in gross royalties.* This includes contest winnings, estate settlements, court settlements and really any other time you received over $600 for anything.
There are other types of Form 1099 besides 1099-MISC, such as 1099-A and 1099-C. These are typically needed in situations such as debt cancellation and are not commonly needed.
Full instructions for Form 1099-MISC are available here (Warning: PDF!). You will also be responsible for reporting this same income on your Form 1040, Schedule C.
*You are also required to report any fishing boat proceeds on a Form 1099, for what it’s worth.