1099-MISC, Independent Contractors, and Self-Employed
Question: I received a Form 1099-MISC instead of a Form W-2. I'm not self-employed and I do not have a business. How do I report this income?
If payment for services you provided is listed in box 7 of Form 1099-MISC (PDF), you are being treated as a self-employed worker, also referred to as an independent contractor:
- You do not necessarily have to "have a business," but simply perform services as a non-employee to have your compensation treated this way.
- The payer has determined that an employer-employee relationship does not exist in your case.
- That determination is complex, but is essentially made by examining the right to control how, when, and where you perform those services.
- It is not based on how you are paid, how often you are paid, or whether you work part-time or full-time.
There are three basic areas that are relevant to determine employment status:
- Behavioral control,
- Financial control, and
- Relationship of the parties
For more information on employer-employee relationships, refer to Chapter 2 of Publication 15, (Circular E), Employer's Tax Guide and Chapter 2 of Publication 15-A (PDF), Employer's Supplemental Tax Guide.
Unless you were an employee, you report your non-employee compensation on Schedule C (Form 1040) (PDF), Profit or Loss from Business (Sole Proprietorship), or Schedule C-EZ (Form 1040) (PDF), Net Profit from Business:
- You also need to complete Schedule SE (Form 1040) (PDF), Self-Employment Tax, and pay self-employment tax on your net earnings from self-employment, if you had net earnings from self-employment of $400 or more.
- This is the manner by which self-employed persons pay into the Social Security and Medicare trust funds. Employees pay into the Social Security and Medicare trust funds, as well as income tax withholding, through deductions from their paychecks.
- Generally, there is no tax withholding on self-employment income.
- You may be subject to the requirement to make quarterly estimated tax payments.
- If you did not make estimated tax payments, you may be charged a penalty for underpayment of estimated tax.
If you think that you were, or are an employee and you would like the IRS to issue a determination, you should submit Form SS-8 (PDF), Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. If the SS-8 Unit determines you to be an employee, you should report the income reported on the Form 1099-MISC with all of your other income, including income earned as an employee on line 7 of your Form 1040 (PDF). Use Form 8919 (PDF), Uncollected Social Security and Medicare Tax on Wages, to figure and report your share of the uncollected social security and Medicare taxes due on your compensation if you were an employee but were treated as an independent contractor by your employer. Filling out Form 8919 will allow your social security and Medicare taxes to be credited to your social security account. For an explanation of the difference between an independent contractor and an employee, see Pub.1779 (PDF), Independent Contractor or Employee.
- Publication 505, Tax Withholding and Estimated Tax
- Tax Topic 407, Business Income
- Tax Topic 762, Independent Contractor vs. Employee
- Publication 17, Your Federal Income Tax for Individuals
Category: Interest, Dividends, Other Types of Income
Subcategory: 1099 MISC, Independent Contractors, and Self Employed