Independent contractors in the US receive Form 1099-NEC from clients who pay them $600 or more during the tax year. Understanding 1099 requirements helps you stay compliant and avoid IRS penalties.
This guide covers 1099-NEC filing thresholds, deadlines, how to track your income, what to do if you don't receive a 1099, estimated quarterly tax payments, and common deductions for contractors.
The 1099-NEC form is the document that clients use to report payments to independent contractors to the IRS. If you earned $600 or more from a single client during the tax year, that client is required to send you a 1099-NEC by January 31. The critical point many contractors miss is that you are still responsible for reporting all your income on your tax return even if you do not receive a 1099-NEC from every client. The IRS cross-references the forms it receives against your tax return, and any discrepancy can trigger an audit. To protect yourself, keep a running spreadsheet of all your invoices and payments throughout the year, regardless of whether you receive a 1099. Also, remember that independent contractors pay self-employment tax (Social Security and Medicare) in addition to income tax. Setting aside 25 to 30 percent of each payment in a separate savings account ensures you have the funds available when quarterly estimated taxes are due.