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), the payer is treating you as a self-employed worker, also referred to as an independent contractor.
- You do not necessarily have to "have a business," for payments for your services to be reported on Form 1099-MISC. You may simply perform services as a non-employee.
- 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 what services you perform and how 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 if an employer-employee relationship exists:
- Behavioral control,
- Financial control, and
- Relationship of the parties
If you think that you were an employee of the payer and you would like the IRS to issue a determination of your worker status, 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 on line 7 of your Form 1040 (PDF).
- You should 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 the wages amount reported to you on Form 1099-MISC.
- Filling out Form 8919 will allow your social security and Medicare taxes to be credited to your social security account.
If you were not an employee of the payer, where you report the income depends on whether your activity is a trade or business. You are in a self-employed trade or business if your primary purpose is to make a profit and your activity is regular and continuous.
- If you are in a self-employed trade or business, you must include payments for your services on Schedule C (Form 1040) (PDF), Profit or Loss From Business (Sole Proprietorship), or Schedule C-EZ (Form 1040) (PDF), Net Profit From Business.
- If you are self-employed, you will also need to complete Schedule SE (Form 1040) (PDF), Self-Employment Tax, and pay self-employment tax on your net earnings from self-employment of $400 or more.
- There is no withholding of tax from self-employment income. As a self-employed individual, you may need to make estimated tax payments during the year to cover your tax liabilities.
- If you are not an employee of the payer, and you are not in a self-employed trade or business, you should report the income on line 21 of Form 1040 and any expenses on Schedule A (Form 1040) (PDF), Itemized Deductions.
For an explanation of the difference between an independent contractor and an employee, see Publication 1779 (PDF), Independent Contractor or Employee. 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, Employer's Supplemental Tax Guide.
- 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