How to File Taxes for a 1099 Employee

by Jessica Kent; Updated September 26, 2017
Earnings paid to independent contractors are reported on Form 1099.

If you are an independent contractor, you will receive a Form 1099-MISC from each company that paid you to do work by Jan. 31 each year. This form reports the amount of non-employee compensation, rents, royalties and other miscellaneous income you received from each payer. The information on this form is reported to the Internal Revenue Service. Form 1099-MISC is issued to independent contractors who receive more than $600 in non-employee compensation or more than $10 in royalties during the calendar year. You’ll need the information on this form to prepare your personal income tax return.

Items you will need

  • Form 1099-MISC
  • Form 1040
  • Schedule C
  • Schedule E
  • Schedule SE
Step 1

Review the 1099-MISC forms you received from each company for accuracy. Promptly report any errors to the company that issued the 1099-MISC and request a corrected form.

Step 2

Determine if you will file a Schedule C or E to declare the income reported on the 1099-MISC or if you will include it as an "Other Income" item on line 21 of Form 1040. If you received 1099-MISC forms from several companies for work that you consistently perform, and this work is a primary source of income, you should file a Schedule C or E to report both the income and deductible expenses associated with generating the income. If you do not receive a Form 1099-MISC every year or you received a 1099-MISC for a job you performed once, you can report this income on line 21 of Form 1040.

Step 3

Prepare Schedule C and include the income reported on line 7 of Form 1099-MISC. Report this income on line 1 of Schedule C. Expenses associated with generating the income such as advertising, office supplies, auto expenses and insurance should be entered in Part II of Schedule C. The net profit calculated from Schedule C, line 31 will be entered on line 12 of Form 1040 and line 2 of Schedule SE. Schedule SE is the form you will use to calculate self-employment taxes on your Form 1099-MISC earnings.

Step 4

Prepare Schedule E and enter the income shown on lines 1 or 2 of Form 1099-MISC. Report this income on line 3 (Rents) or 4 (Royalties) of Schedule E. Expenses associated with generating this income, such as repairs, utilities, mortgage interest and taxes, are included in lines 5 through 18 of Schedule E. The net profit calculated from Schedule E, line 26 should be entered on line 17 of Form 1040.

Step 5

Calculate your self-employment tax using Schedule SE if you reported earnings from Form 1099-MISC on Schedule C. Enter the amount of other income from Form 1040, line 21 and/or the net profit from line 31 of Schedule C on line 2 of Schedule SE. If you have earnings to report on line 1 of Schedule SE, add lines 1 and 2 and enter the result on line 3. Multiply line 3 by 0.9235. If line 4 is less than $400, you will not owe self-employment tax. If line 4 is between $400 and $106,800, multiply line 4 by 0.153 and enter the result on line 5 of Schedule SE and line 56 of Form 1040. If line 4 is greater than $106,800, multiply line 4 by 0.029 and add $13,243.20 to the result. Enter your total on line 5 of Schedule SE and on line 56 of Form 1040.

Tips

  • Self-employment tax is the combination of Social Security and Medicare taxes typically paid by an employer and an employee on earnings. When you are self-employed, you are both the employer and employee, so you must pay both portions of the tax. The amount you owe is reported on line 56 of Form 1040. However, the IRS allows you to claim an adjustment to your income on line 27 of Form 1040 for one-half of the self-employment tax.

About the Author

Jessica Kent started writing professionally in 2002. Her articles have appeared in publications including the New York State Bar Association's "Family Law Review," "Valuation Strategies" and "Metropolitan Corporate Counsel." Through her writing, she strives to assist people in making informed financial decisions. She is a Certified Public Accountant in New York. Kent holds a Bachelor of Science in accounting from Binghamton University.

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