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Commonly Asked Questions about US Contractor Legal Forms

A 1099 employee is a contractor rather than a full-time employee. These employees may also be referred to as freelancers, self-employed workers, or independent contractors.
If youve made the determination that the person youre paying is an independent contractor, the first step is to have the contractor complete Form W-9, Request for Taxpayer Identification Number and Certification.
Form 1099 is a tax information return that reports income received outside of wages, salaries and tips. There are three different versions, each with different purposes: Form 1099-NEC reports how much a business paid annually to nonemployees, including independent contractors.
Both the Form W-2 and Form 1099 serve a similar purposeto report income you earned from sources throughout the tax yearbut each is issued under different circumstances and requires slightly different approaches for tax season planning.
The 1099-NEC is now used to report independent contractor income. But the 1099-MISC form is still around, its just used to report miscellaneous income such as rent or payments to an attorney. Although the 1099-MISC is still in use, contractor payments made in 2020 and beyond will be reported on the form 1099-NEC.
Which Taxes Do 1099 Contractors Pay? 1099 contractors pay self-employment tax plus local, state, and federal income tax. Local and state taxes differ depending on your area. For example, businesses in Jacksonville, Florida are not subject to local or state income tax.
What Is the 1099 Form Used for? The 1099 form is used to report non-employment income to the Internal Revenue Service (IRS). Businesses are typically required to issue a 1099 form to a taxpayer (other than a corporation) who has received at least $600 or more in non-employment income during the tax year.