If you’re a prolific independent contractor-say you’re a freelance writer and work for a bunch of different publications-you could end up with a pile of 1099-NECs. 2 But even if you don’t receive a 1099 because you earned less than $600, you’re still supposed to report that income to the IRS. Any companies you did more than $600 of work for should send you a 1099 at the end of the year. These little tax forms list how much money you earned as a contractor so you can report it on your taxes. Independent contractor income is usually reported on a 1099-NEC (the NEC stands for nonemployee compensation) or a 1099-K. The IRS does not classify this money as a salary or wages because only W-2 employees earn a salary or wages. Some companies pay contractors by the hour and others pay them by the project. Independent contractors get paid in any number of ways: checks, cash, direct deposits, digital payments (Venmo, PayPal, etc.). How Is Independent Contractor Income Paid and Reported? You probably miss out on water-cooler talk too. 1 Basically, if you’re a contractor, you don’t have to show up at an office at a certain time each week or work on a specific schedule.

The IRS has a bunch of rules for determining if someone is an employee or an independent contractor, but the general rule is that you’re an independent contractor if a company assigns you work but does not direct or control how you do it. (We’ll talk more about that in a minute.) At the end of the year, the companies they work for send them a 1099 instead of a W-2. Independent contractors work for one or more companies and don’t receive benefits or have payroll taxes withheld from their checks. Got small business tax questions? RamseyTrusted tax pros are an extension of your business. (They also have to laugh at their boss’s jokes.) or you’re unemployed.Įmployees receive company benefits, have payroll taxes withheld from their paychecks, and receive a W-2 at the end of the year that lists how much money they earned and how much taxes were withheld. The IRS classifies workers into two categories: employees and nonemployees (independent contractors). Independent contractor taxes can be difficult, but we’re here to walk you through everything you need to know to win when it comes to tax time. While independent contractors come from many different walks of life, they have something in common: a tricky tax situation. Some common professions for independent contractors include: accountants, writers, electricians, ride-share drivers, landscapers, lawyers, hairstylists and doctors. and a lot of times, your own tax guy (or gal). Independent contractor, freelancer, gig worker, 1099 employee-there are lots of ways to say the same thing: You’re self-employed.

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