When you’re looking for freelance jobs, you may see something like, This is a 1099 contract position.
That’s simply a reference to a tax form that your client will use to report the money that they pay you.
There are several types of 1099 forms. The one that’s relevant to freelancers is the 1099-MISC. Any client or business that spends at least $600 in a year with one freelancer is supposed to report those payments. That helps Uncle Sam keep up with how much money freelancers make.
During tax season, you’ll receive a copy of the 1099 forms that your clients send to the IRS. They’ll show how much each client paid you. Don’t think because you’re paid directly that you can avoid reporting that money. When you receive a 1099-MISC that means the IRS has received a copy and has the money on record.
And even if you don’t earn enough to get a 1099-MISC from a client, you’re supposed to report that money.
On the flip side, if you pay for services–say you get your website or portfolio designed or you buy images from a freelance photographer–you should collect that freelancer’s information and submit a 1099-MISC. Those payments are an expense you can deduct and lower your taxes.