Self-employment offers many benefits, providing you with the freedom to pursue your passions, the ability to set your schedule, and financial growth opportunities outside of the standard 9-5 job.
But it also comes with more bookkeeping than you may have realized, particularly around tax season.
When you work for yourself, whether as a freelancer in the gig economy or as a business owner who hires freelancers, there are some things you should know about tax forms:
- You need to know which forms you’ll receive and what information they contain.
- You need to know which forms you’ll need to file your taxes and when you should receive them.
- You need to know what happens if you don’t receive your forms.
What forms do I need to file my taxes?
As a self-employed individual, there are many forms you could receive for tax purposes, so it’s a good idea to know a little about them.
Independent contractors receive 1099 tax forms to report income.
There are four types of 1099 forms common for independent contractors to receive during tax season. They include 1099-MISC, 1099-NEC, 1099-K, and 1099-INT.
In general, business owners should make the forms available by January 31, either by mail or electronically.
Key point: It’s important to note that there are more than these four 1099 forms, but these are the most common for self-employed individuals.
1099-MISC
This form reports income received for more than $600 for things such as rents, prizes and awards, royalties, and payments to an attorney.
As a self-employed individual, you generally should receive a 1099-MISC if you earn more than $600 for the line items mentioned above.
If you pay a small business or freelancer $600 or more, you’ll generally need to file a 1099-MISC with the IRS and send a copy to the company or freelancer by January 31.
Download the 1099-MISC form for 2023 here.
1099-NEC
From 1983 to 2020, the IRS included freelance income on the 1099-MISC, but the form got confusing for business owners because it had two different due dates.
With the 2021 tax year, the IRS reverted to Form 1099-NEC, which they used before 1982. This form reports non-employee compensation of more than $600 paid in cash.
That includes actual cash payments, checks, or ACH, but doesn’t include any payments made by credit card. The 1099-K covers those payments, which we’ll discuss next.
If you’re a freelancer who earned more than $600 in cash for the year, you can generally expect to receive a 1099-NEC by January 31. If you paid a freelancer in cash more than $600 for the year, you’d need to file the form with the IRS and send a copy to the freelancer.
Download the 1099-NEC form for 2023 here.
1099-K
This form requires credit card companies and third-party processors to report payment transactions.
For small businesses that accept credit card payments, they will only receive a 1099-K if they meet the annual thresholds for gross payment and number of transactions: a volume of over $20,000 and more than 200 transactions in the calendar year.
Important: Don’t double count income. If your client paid you by credit card, you might receive both a 1099-NEC and 1099-K for the same work. Some clients don’t know that 1099-NECs are only for cash payments.
Download the 1099-K form for 2023 here.
1099-INT
This form reports any interest paid to you or that you paid to someone else for more than $10.
For example, if you have a high-yield savings account with a large enough balance to pay out more than $10 of interest in a year, you will receive a 1099-INT.
Download the 1099-INT form for 2023 here.
What do I need to bring for my tax appointment?
It’s important you bring all the essential items to your tax appointment to ensure that your CPA files your taxes accurately and there isn’t a delay with your return.
Personal documents
In terms of personal documents, you’ll need the following:
- Valid photo ID
- Social security cards, verification letters, or ITIN assignment letters for you and your business partners (if applicable)
- 2-3 years prior tax returns, if available
Business documents
To file your business tax return correctly, be sure to bring these things with you:
- Employer identification number (EIN), if applicable
- Formation documents filed with your state’s Secretary of State
- Names and contact information for all business owners
- Accounting ledgers and records
What happens if I don’t receive my forms?
For the self-employed dealing with 1099s, there may be cases in which you don’t receive one when you think you should.
Some common reasons you may not receive a 1099 include:
- Not meeting the minimum requirements (such as receiving more than $600 on a 1099-NEC or the $20,000 gross payment amount & 200 transaction threshold for 1099-K)
- The business owner forgot to send you one
You still have to report the income you earned to the IRS in both cases. Failure to do so could result in fines and other problems you may not wish to deal with as a business owner or freelancer.
Even if you only made $400 running errands for people through DoorDash, make sure you report the income. It will save you a lot of trouble in the long run.
Tax season can feel a little daunting when you have a bunch of new tax forms to consider, but the longer you work for yourself, the easier this becomes.
Plus, if you decide to hire a CPA, they can walk you through the process, making it even easier. All you’ll have to do is keep up with your tax documents and information, take them to your CPA, and sit back as they do the work for you.
