If you don’t work for someone directly but still bring in income, there’s a good chance you’re considered a 1099 employee. This typically applies to independent contractors, freelancers, gig workers or anyone who falls under the umbrella of self-employed.
Here’s what you need to know about being a 1099 employee, what tax implications you may face, and what to expect.
A 1099 employee is a worker who doesn’t directly work for an employer — sometimes called freelancer, contractor or self-employed. So if you’re self-employed, you may not be anyone’s direct employee!
The digits “1099” refer to 1099 tax forms used to report income and file taxes: 1099-MISC and 1099-NEC. The MISC refers to “miscellaneous,” and NEC refers to “nonemployee compensation.”
In short: If you don’t receive a regular paycheck from an employer that automatically deducts taxes (Forms W-4 and W-2), but you’re still providing services or goods and getting paid, you’ll likely need to complete a 1099 form to report your income or payments and calculate taxes due.
There’s no set “type” of work that’s considered 1099 work — it could be any type of work! Types of 1099 workers can include:
Just remember: If you worked this year, but didn’t receive income directly an an employer (and by extension, didn’t get a W-2), then you’re likely considered a 1099 worker. The information returns 1099-MISC and 1099-NEC are used to report income that didn’t come from an employer. If you earn at least $600 from a single client, they must send you a 1099-NEC by January 31 of the following year.(1) This 1099 form is what you’ll use to file taxes.
W-2 workers have employers that pull out taxes for them, deducted right out of their paycheck. So, how do you do taxes without a W-2? Without a W-2 or an employer, 1099 workers have to figure taxes out on their own, but here’s some key information to know:
There are forms that can help you estimate your owed amounts as a self-employed person. For example, you could use Form 1040-ES to figure out how much you owe in taxes for the year to see if you’ll be required to pay taxes quarterly. There’s also Schedule SE (attached to Form 1040) to figure the tax due on net earnings from your self-employment. (3)
If this is all new to you, we heavily recommend contacting a tax professional for guidance.
As a general rule, it is recommended for 1099 workers to set aside 25% to 30% of their income to cover taxes.
Alternatively, you could also subtract expected tax credits or deductions if you want to pay exactly what you owe. Just remember that if you overpay on taxes, you could receive a refund after filing your taxes for excess payments. But if you underpay on taxes, you’ll likely owe taxes after you file.
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Being a 1099 contractor can mean more freedom and flexibility when it comes to work, but it can also mean a more hands-on approach to handling taxes. Since taxes aren’t withheld for you, it’s crucial to set aside money and make quarterly tax payments if required. Understanding the key differences between 1099 and W-2 employment can help you decide if independent work is right for you.
Go to the IRS’s Self-Employed Tax Center to learn more about being a 1099 employee. If you’re unsure how to handle your taxes, consider working with a tax professional to avoid surprises at tax time.
Finder data suggests that women aged 25-34 are most likely to be researching this topic.
| Response | Male (%) | Female (%) |
|---|---|---|
| 65+ | 4.74% | 3.27% |
| 55-64 | 6.45% | 6.25% |
| 45-54 | 9.21% | 8.68% |
| 35-44 | 11.64% | 10.98% |
| 25-34 | 11.74% | 11.78% |
| 18-24 | 7.96% | 7.30% |
No, independent contractors don’t usually receive employer-sponsored benefits like health insurance, paid time off or retirement perks. However, they can set up their own benefits, such as an individual retirement account (IRA) or self-employed health insurance.
Yes, 1099 contractors may be able to deduct business expenses like home office costs such as internet, phones and equipment. Just be sure to keep your receipts!
If you don’t make quarterly estimated tax payments, you may owe penalties when you file your return. The IRS expects self-employed individuals to pay throughout the year if they expect to owe at least $1,000 in taxes for that year.
Yes, some people have both types of income. If you’re employed and also freelance on the side, you’ll receive a W-2 from your employer and a 1099-NEC from freelance clients.
If you work for DoorDash, you are considered an independent contractor. If you earned more than $600 within the calendar year, Dashers will receive a 1099-NEC form in the Dasher app by January 31st (located in the Earnings tab and under Tax documents). You can either get the 1099 form electronically or request to have it be mailed. Once you get the 1099 form, you will submit it with your tax return for the tax year.
Chime’s tax filing service is free and easy to use for both state and federal tax returns, but it may not be the best for complicated taxes.
Cash App offers free, online federal and state tax filing — but not for all states or tax situations.
Keeper is for 1099 employees and business owners, offering annual plans for year-round tracking and tax filing.
An honest look at ezTaxReturn’s costs, ease of use, state limits and real customer experiences.
Learn about the software that allows you to file simple taxes online starting at $25.
FreeTaxUSA lets you file federal returns for free. And you’ll only pay $14.99 for state returns with this online tax preparation software.
Four steps to file your 2024 taxes in the 2025 tax season
A big name in the industry, see the cost and plans available with H&R Block tax preparation.
TurboTax is DIY tax preparation software with professional support so you can do your own taxes accurately, quickly, and affordably.
My wife got hired at a hair salon as a 1099 employee. Her boss sets her schedule and pays her weekly not invoiced. My question is it legal to do this for an indefinite period of time, seems to me lime she is doing this to avoid unemployment tax and workers comp
Hi John,
Thanks for getting in touch! As it says on the information above, when you work as a 1099 employee, you’re not an employee. Instead, you’re considered an independent contractor. As an independent 1099 worker, you can enjoy the advantages of setting your own price, working around your own schedule and controlling how you meet your obligations to your clients. But you’ll typically lose out on employee benefits like compensated time off, overtime and unemployment benefits, not to mention the responsibility of filing your own taxes throughout or at the end of the year.
Hope this helps!
Best,
Nikki
I make @$500/month as a 1099 employee. Must I file quarterly estimates and who pays the social security on theses wages?
Hi Jimmer,
Thanks for getting in touch with Finder! As it says on the page – Yes, you are responsible for paying your own taxes. Your client will not withhold federal or state taxes, like they will for W-2 employees. Outside of the 1099-MISC, you may need to file your estimated taxes quarterly if you will pay more than $1,000 in taxes for the fiscal year. Also, as a self-employed individual, you must pay Social Security and Medicare taxes.
Hope this helps!
Best,
Nikki