If a company hires you as an independent contractor and pays you more than $600, it must send you a Form 1099-MISC. If the company fails to give you a 1099-MISC by the Internal Revenue Service deadline, which is usually between the middle and end of February, you still must report the income on your tax return.
1099 Rules for Independent Contractors
The IRS classifies you as an independent contractor if you are a business owner or contractor who reaches the result a company asks for with no instruction from the company on how you reach the result. For example, if a company hires you as an independent contractor or your company to install pipes, but gives you no instructions on how to install the pipes, you are considered by the IRS to be an independent contractor.
A company must issue you a Form 1099-MISC to document the expenditure. If they fail to give you a 1099-MISC by the IRS deadline, which is usually in mid to late February, the company may face a $50 or higher IRS penalty. This penalty has no ceiling. For these reasons, companies benefit from issuing you a 1099-MISC. If you have not received your 1099-MISC, contact the company and ask when you can expect it. It may have made a mistake, or your 1099-MISC may have been lost in the mail.
Exceptions to Receiving a Form
A Form 1099-MISC is IRS proof of how much money you received for independent contract work from the company that hired you. If the company paid you less than $600, it doesn't have to send you a 1099-MISC. A Form 1099-MISC is to independent contractors what the Form W-2 is to employees. Use the information, primarily how much a company paid you to fill out your sole proprietorship tax forms, 1040, Schedule C, 1040, Schedule C-EZ and if you use it, 1040-ES for estimated taxes.
You have no control over an employer not giving a 1099. Even without the form, report the income you received with your other gross receipts on Schedule C or Schedule C-EZ of Form 1040. You must report all gross receipts, including income under $600. Include a note with your return, giving details about the income for which you need but lack a 1099-MISC. Explain why you don't have it, and describe the source of the income. The IRS will deal with that company.
2018 Tax Changes and Payroll Taxes
Although a missing 1099 C will still be a problem in 2018, it's important to pay attention to some changes that will affect you as a contractor if you're a six-figure earner. Although you'll still pay 15.3 percent on your income, the wage base limit has increased to $128,400.
2017 Payroll Taxes
If you're still filing your 2017 taxes, you'll pay 15.3 percent on the first $127,200 and 2.9 percent on any income above that.
- IRS.gov: Independent Contractors Defined
- IRS.gov: What Do I Do with This 1099-MISC?
- IRS: About Form 1099-MISC, Miscellaneous Income
- IRS: Increase in Information Return Penalties
- Shared Economy Tax: 2018 Tax Updates: 1099 Tax Rate for Independent Contractors
- The Motley Fool: 2017 Self-Employment Tax: How Much Will You Owe?
Based in New York, Kate Bluest has been writing for various online publications since 2005. She has participated in several writing workshops, including the MIT Writing Workshop. Bluest holds a Bachelor of Science in business administration from SUNY Empire State College.