If you work as an independent contractor, you’re responsible for reporting all income you’ve earned on your taxes. Generally, the person or organization for whom you work will provide you with a 1099 form to help you report any income you were paid, but what happens if they don’t? Our CPA firm in Durham, NC is sharing how to report self-employment income without a 1099 so you can complete your taxes correctly and avoid fines or penalties.

How to report self-employment income

Are You an Independent Contractor?

An independent contractor is someone who is self-employed and is contracted to provide work or service to an individual or organization as a non-employee. Independent contractors, often called freelancers, don’t have taxes, Social Security, or Medicare taken out of their pay and must pay these themselves through quarterly estimated taxes.

Independent contractors often include the following professions:

  • Doctors
  • Lawyers
  • Accountants
  • Contractors and subcontractors
  • Writers
  • Graphic designers
  • Artists
  • Rideshare drivers (like Uber or Lyft)
  • Delivery providers (like Doordash or Instacart)
  • Lawncare businesses
  • Housecleaners
  • Interior designer

What Is a 1099 Form?

Independent contractors need to keep careful records of payments from their clients. However, the clients for whom they work may also need to provide documentation of payments in the form of a 1099-NEC (nonemployee compensation) form if they paid the independent contractor over $599 total in a single calendar year. The client fills out the form and sends a copy to the independent contractor as well as to the IRS by January 31 of the following year after the work was completed.

How to Report Income Without a 1099

If you have a client who has paid you less than $600 in a calendar year, you may not receive a 1099-NEC form detailing your payments from them. Even though the IRS is not informed of these payments, it’s still your responsibility to report them and pay taxes on them. This can be particularly confusing if you have multiple clients who have not issued you a 1099 form. However, if you keep careful records of your payments, you should be able to report an accurate amount of your yearly income to the IRS by filing a Schedule C with your business income and expenses.

Reporting Cash Income as an Independent Contractor

If you are paid in cash for your service or work, or you receive a tip on top of your rate of pay, there may not be documentation of this payment. However, like any other payment you receive, you are legally required to include this income on your Schedule C tax form.

While you can use the IRS’s tip log form to track cash payments, you’re not required to do so. Instead, you can use a personal spreadsheet or app to track cash payments and include this income with your “gross receipts” when you fill out your Schedule C.

Schedule a Consultation for Tax Preparation in Raleigh Today

If you are an independent contractor, trying to keep up with financial records, quarterly self-employment taxes, and annual tax preparation can be confusing and overwhelming. Instead of trying to navigate these complexities on your own, working with an experienced accountant can ensure accuracy, timely filing, and most importantly, reducing your tax payments. To learn how we can help you meet these goals with our accounting and bookkeeping services, call us at  (919) 872-0866 or fill out the form below to get set up a consultation with CPA.

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