Who Gets a 1099 Instead of a W-2

You receive a 1099 when you work as an independent contractor, not as an employee

The IRS sends a 1099 to people who earned money from someone else but were not on that person's or company's payroll. If you were paid as a contractor — meaning you controlled how and when you did the work, provided your own tools or equipment, and could work for other clients at the same time — you will receive a 1099 instead of a W-2. The person or business that paid you files the 1099 with the IRS to report what they paid you.

The most common version is the 1099-NEC (Nonemployee Compensation), which reports payments for services. A business files a 1099-NEC for any contractor they paid $600 or more in a calendar year. Other 1099 forms exist for different types of income — 1099-INT for interest, 1099-DIV for dividends, 1099-MISC for miscellaneous payments — but the filing rule is the same: the person or entity paying you reports it to the IRS.

You are responsible for reporting all 1099 income on your tax return, even if you do not receive a 1099 form. If someone paid you $500 and did not file a 1099 because it was under the $600 threshold, you still owe tax on that $500.

Key Takeaways

• A 1099 is filed by the person or business that paid you, not by you, and it reports non-employee income to the IRS.
• You receive a 1099-NEC if a business paid you $600 or more for services as a contractor during the year.
• The $600 threshold is a filing requirement for the payer, not a threshold for your tax obligation — you owe tax on all contractor income.
• You must report all 1099 income on your tax return, and you are also responsible for paying self-employment tax on that income.
• If you worked as an employee and received a paycheck with taxes withheld, you get a W-2, not a 1099.

The difference between contractor income and employee income

The IRS distinguishes between contractors and employees based on control and independence, not on what you call the arrangement. If the person paying you controlled when you worked, how you did the work, what tools you used, and whether you could work for competitors, you are likely an employee and should receive a W-2. If you set your own hours, used your own equipment, worked for multiple clients, and had the freedom to refuse assignments, you are likely a contractor and will receive a 1099.

This matters because employees have taxes withheld from each paycheck — the employer takes out federal income tax, Social Security tax, and Medicare tax. Contractors do not have taxes withheld. You receive the full amount and are responsible for setting aside money to pay income tax and self-employment tax (which covers both the employee and employer portions of Social Security and Medicare) when you file your return.

Some people work both ways in the same year. You might be a full-time employee at one company and do freelance work on the side. In that case, you will receive a W-2 from your employer and a 1099 from your freelance clients. Both go on your tax return.

Who files the 1099 and when

The payer — the person or business that paid you — is responsible for filing the 1099 with the IRS and sending you a copy. They must file by January 31 of the year after payment. You should receive your copy by that same date, though some payers mail them later.

The payer files a 1099-NEC for each contractor they paid $600 or more. If they paid you $550, they are not required to file a 1099, but you still owe tax on that $550. If they paid you $650, they must file. The threshold applies to the total paid in the calendar year — if you did three jobs for the same client and earned $200, $300, and $150, that adds to $650, so they file a 1099-NEC.

If you do not receive a 1099 by early February, contact the payer and ask for it. If they say they did not file one because the amount was under $600, ask them to file it anyway — some payers do this voluntarily. If they refuse and you know you earned over $600, you can report the income on your return without the 1099 form.

Types of 1099 income beyond contractor work

The 1099-NEC is the most common form for people who do freelance or contract work, but other 1099 forms report different kinds of income. A 1099-INT reports interest you earned from a bank account or savings bond. A 1099-DIV reports dividends from stocks or mutual funds. A 1099-MISC reports miscellaneous income like prizes, awards, or rental income in some cases.

You might receive multiple 1099 forms in a single year if you have different income sources. A person who freelances, owns rental property, and has a brokerage account could receive a 1099-NEC, a 1099-MISC, and a 1099-DIV. Each one goes on your tax return in the appropriate section.

The filing thresholds vary by form type. Interest of $10 or more triggers a 1099-INT. Dividends of $10 or more trigger a 1099-DIV. Contractor payments of $600 or more trigger a 1099-NEC. If you are below the threshold, the payer is not required to file, but you still owe tax on the income.

What to do when you receive a 1099

When you receive a 1099, check it for accuracy. The form shows your name, address, and tax ID (usually your Social Security number), the payer's information, and the amount paid. If the amount is wrong — if it says $5,000 but you only earned $4,500 — contact the payer when ready and ask them to file a corrected 1099-NEC (called an amended 1099).

Keep the 1099 with your tax records. You do not mail it to the IRS; the payer already did that. You use it as a reference when you fill out your tax return. Report the income on Schedule C (if you are self-employed) or Schedule 1 (if you have other income), depending on your situation and the type of 1099.

If you receive a 1099 for income you did not earn — for example, the payer listed you by mistake — contact them and ask them to file a corrected 1099 showing $0. Do not ignore it. If the IRS receives a 1099 with your name and tax ID, they expect to see that income reported on your return.

Self-employment tax on 1099 income

When you earn income as a contractor, you owe not only income tax but also self-employment tax. This is Social Security and Medicare tax combined. As an employee, your employer withholds these taxes from your paycheck and pays a matching amount. As a contractor, you pay both portions yourself — currently 15.3% of your net self-employment income (12.4% for Social Security and 2.9% for Medicare).

You calculate self-employment tax on Schedule SE, which you file with your tax return. The amount you owe depends on your net profit after business expenses, not the gross amount on the 1099. If you earned $10,000 on a 1099 but had $3,000 in business expenses, you owe self-employment tax on $7,000, not $10,000.

Many contractors underestimate their tax bill because they forget about self-employment tax. A $10,000 1099 does not mean you owe 10% in taxes; you owe income tax plus self-employment tax, which can total 25% to 30% depending on your tax bracket. Setting aside 25% to 30% of each 1099 payment is a practical way to avoid a large bill at tax time.

Frequently Asked Questions

Do I have to report a 1099 if the amount is under $600?

Yes. The $600 threshold is when the payer must file a 1099 with the IRS, not when you must report income. If you earned $500 from a client and they did not file a 1099, you still owe tax on that $500. Report all income you earned, regardless of whether you received a 1099 form.

What if I receive a 1099 but I was actually an employee?

Contact the payer and explain that you should have been classified as an employee. Ask them to file a W-2 instead and to correct the 1099. If they refuse, you can file Form SS-8 with the IRS to request a information of worker status. In the meantime, report the income on your return and note the dispute.

Can I deduct business expenses from 1099 income?

Yes. Report your gross 1099 income, then subtract ordinary and necessary business expenses on Schedule C. Expenses might include supplies, equipment, software, a home office, or mileage. Keep receipts and document what each expense was for. Your net profit (income minus expenses) is what you owe income tax and self-employment tax on.

What if I receive a 1099 for the wrong amount?

Contact the payer when ready and ask them to file a corrected 1099-NEC. They have until January 31 to file the correction. Once they file it, the IRS will receive the corrected amount. Report the correct amount on your tax return, not the wrong amount on the original 1099.

Do I need to file a tax return if I only have 1099 income?

You must file if your net self-employment income is $400 or more, or if your total income exceeds the standard deduction for your filing status. Even if you are below these thresholds, filing may be worth it if you had taxes withheld or are owed a refund. Check the IRS filing requirements for your situation.