How To Approach Tax Season As A 1099 Employee


Approximately 11% of working, adult Americans are full-time independent contractors and this number is increasing, which means there will be more people who need to work out their own taxes in time for tax season. Whether you're new to freelancing or you simply haven't quite gotten used to filing as a 1099 employee, here's how you can get your taxes sorted.

Also read: Your 2019 Tax Return

Understand the Terminology

When you work for someone else but you're not an employee, you're classed as an independent contractor. This means that when you're filing income taxes, you're a sole proprietor. Since you don't have an employer withholding tax, you're responsible for calculating and paying your own taxes during tax season.

What Is A 1099?

The 1099 form has a number of different purposes, but for independent contractors, it allows you to document your self-employment income. Each time you work for a client, you should receive a 1099-MISC form. In box 7, you will need to add the amount of compensation you were paid during the tax year. You need to file your taxes by the 31st of January so you can file your taxes the following year.
You'll need to add up the total of all your 1099s and enter it on your Schedule C. Your Schedule C is filed with your tax return, and this calculates whether you've made a profit or loss that year.

Self-Employment Tax

Along with income tax, you'll also need to pay self-employment tax. You'll file this when you file your income taxes. These are the contributions to Medicare and Social Security which employees have taken out of their paychecks automatically. Whether you're an L.L.C, a partnership, or a sole proprietor, you need to pay self-employment tax since you're not an employee.
Usually, employers pay half of these taxes. Since you're paying both halves, you can then deduct the employer's half.

Also read: Tax Refund Chart

Deducting Expenses

One of the great things about working as an independent contractor, is a massive list of things you can deduct. These need to be related to your work though, which is why it's so important to keep your business and personal finances separate. You need to keep records for your business, so you can keep track of which expenses are business-related.
If you commit to a good organization system, you'll find that tax season is a lot easier and simpler. Some of the things you can deduct include:

  • Tax, bookkeeping, and accounting expenses
  • Advertising and marketing expenses
  • Software, magazines, and books that relate to your business
  • Car and gas expenses (if traveling for business)
  • Training and education expenses
  • Home office expenses
  • Insurance expenses
  • Professional and legal fees
  • Entertainment and meal expenses
  • Office materials and supplies

Your specific business expenses need to be clearly documented, with the amount, date, and business purpose labeled. This will ensure that if you're ever audited you can easily justify any deductions you've claimed.

Also read: States With No Income Tax

Are You Ready For Tax Season?

Approaching tax season as a 1099 employee doesn't need to be a nightmare. With the above tips, (and some solid organization skills), you can glide through tax time and come out smiling on the other side. 
Need a 1099-MISC form? Check out our instant online 1099 form generator and begin filing today! If you need to create a payslip, you can try out our check stub maker.

Frequently Asked Questions

Yes, 1099 employees can contribute to retirement accounts such as a SEP-IRA, SIMPLE IRA, or Solo 401(k), which may provide tax advantages.

Yes, you can deduct necessary and ordinary business expenses related to your work as a 1099 employee. This may include supplies, equipment, mileage, and other expenses.

1099 employees are responsible for paying their own taxes, including income tax, self-employment tax, and any relevant state and local taxes. This is typically done through quarterly estimated tax payments.

Estimated tax payments are based on your expected income, deductions, and credits for the year. You can use Form 1040-ES to calculate your estimated tax payments.

You can calculate your self-employment tax using Schedule SE (Self-Employment Tax) on your annual tax return. The tax rate is 15.3% of your net earnings from self-employment.

You report your 1099 income on your annual tax return using Schedule C (Profit or Loss from Business) or Schedule C-EZ (Net Profit from Business).

A 1099 employee is an independent contractor who is not considered an employee by the company they work for. These individuals receive a 1099-MISC form instead of a W-2 form for tax purposes.

Self-employment tax is the Social Security and Medicare tax that self-employed individuals must pay. This covers the employer and employee portions of both taxes.

The IRS sets the standard mileage rate each year. For 2021, the rate is 56 cents per mile driven for business purposes.

Estimated tax payments are due on a quarterly basis: April 15th, June 15th, September 15th, and January 15th of the following year.
Create Your Paystub in 2 minutes

Try our instant paystub generation tool. Flip through our templates page
to chose your best match and receive your stub instantly.

Go ahead and create your own stub now!
How To Approach Tax Season As A 1099 Employee
James Wilson

After graduating from McCombs School of Business in Texas, James joined ThePayStubs as a CPA to make sure the numbers we provide our clients are correct. Read More

Related Articles
money back guarantee
100% Security
Satisfaction Guaranteed
Gold stars

Great Service

First time creating a stub. Customer support was AMAZING. I had a few self-induced issues and customer support was there from start to end.

Brandon Wilson

Brett Hello! Don't hesitate to reach out if you have any questions. I'm just a message away!

We respond immediately

Welcome to our chat support! Glad to have you. Please fill out the form for personalized assistance, and we'll be with you right away.
Start the chat