I received a Form 1099-MISC instead of a Form W-2. I'm not self-employed and don't have a business. How do I report this income?

Answer:

If payment for services you provided is listed in box 7 of Form 1099-MISC, Miscellaneous Income, the payer is treating you as a self-employed worker, also referred to as an independent contractor.

  • You don't 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 doesn't exist in your case.

If you weren't an employee of the payer, where you report the income depends on whether your activity is a trade or business. You're 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're in a self-employed trade or business, you must include payments for your services on Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship), or Schedule C-EZ (Form 1040), Net Profit From Business (Sole Proprietorship).
  • If you're self-employed, you'll also need to complete Schedule SE (Form 1040), Self-Employment Tax, and pay self-employment tax on your net earnings from self-employment of $400 or more.
  • There's 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're not an employee of the payer, and you're not in a self-employed trade or business, you should report the income on line 21 of Form 1040, U.S. Individual Income Tax Return, and any expenses on Schedule A (Form 1040), Itemized Deductions.

If you believe you may be an employee of the payer, see Publication 1779, Independent Contractor or Employee, for an explanation of the difference between an independent contractor and an employee. For more information on employer-employee relationships, refer to Chapter 2 of Publication 15, (Circular E), Employer's Tax Guide, Chapter 2 of Publication 15-A, Employer's Supplemental Tax Guide, and Tax Topic 762, Independent Contractor vs. Employee.

My son is a newspaper carrier. I would like to know if his income is subject to social security and Medicare taxes, and if he must file a Schedule C.

Answer:

As a newspaper carrier, your son may be a direct seller liable to pay self-employment tax. A direct seller is someone who satisfies the following conditions:

  • The person is engaged in the trade or business of delivering or distributing newspapers or shopping news, including directly-related services such as soliciting customers and collecting receipts;
  • Substantially all of the pay for these services (whether or not paid in cash) directly relates to sales or other output rather than to the number of hours worked; and
  • The person performs these services under a written contract that states that the person won't be treated as an employee for federal tax purposes.

Self-employed persons, including direct sellers, report their income on Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship), or Schedule C-EZ (Form 1040), Net Profit from Business (Sole Proprietorship). Use Schedule SE (Form 1040), Self-Employment Tax, if the net earnings from self-employment are $400 or more.

If your son isn't a direct seller (i.e., he doesn't satisfy the conditions above), he may still be liable to pay self-employment tax if he's engaged in a trade or business.

If your son isn't a direct seller and isn't engaged in a trade or business, he may be an employee whose wages are subject to income tax withholding, and social security and Medicare taxes.

If your son is an employee and is under 18 years of age, his income generally isn't subject to social security and Medicare taxes. If his income exceeds a threshold amount, he must report it as wages on Form 1040, Form 1040A, U.S. Individual Income Tax Return, or Form 1040EZ, Income tax Return for Single and Joint Filers with no Dependents.

For more information on the rules that apply to direct sellers and newspaper carriers and distributors, see Publication 334, Tax Guide for Small Business. For an explanation of the difference between an independent contractor and an employee, see Publication 1779, Independent Contractor or Employee, and Tax Topic 762, Independent Contractor vs. Employee.

Additional Information:

I received a Form 1099-MISC with an amount in box 7 for nonemployee compensation. What forms and schedules should I use to report income earned as an independent contractor?

Answer:

  • Independent contractors report their income on Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship). However, you may qualify to use Schedule C-EZ (Form 1040), Net Profit from Business (Sole Proprietorship).
  • Also file Schedule SE (Form 1040), Self-Employment Tax, if net earnings from self-employment are $400 or more. This form allows you to figure social security and Medicare tax due on your net self-employment income.
  • You may need to make estimated tax payments. Refer to Form 1040-ES, Estimated Tax for Individuals, for more details on who must pay estimated tax. If you need to make estimated tax payments and don't pay them timely, you may also need to file Form 2210, Underpayment of Estimated Tax by Individuals, Estates & Trusts.
Must I file quarterly forms to report income as an independent contractor?

Answer:

You may need to make quarterly estimated tax payments. For information on estimated tax payments, refer to Form 1040-ES, Estimated Tax for Individuals.

Note: You may also have state and local requirements for estimated tax payments. See your state's individual website for additional information. To access information for your state, refer to our State Government Websites page.

Additional Information:

I received a Segal AmeriCorps Education Award and an income statement for it. Are these payments taxable?

Answer:

Yes, Segal AmeriCorps Education Awards are taxable in the year they're paid. If you receive an award and the payment was $600 or more during the year, you should receive a Form 1099-MISC, Miscellaneous Income. The 1099-MISC will show the amount of the award in box 3, Other Income, with no withholding. Report the payment amount on the "Other income" line of Form 1040, U.S. Individual Income Tax Return, even if you don't receive Form 1099-MISC.

Additional Information: