Listen, if you are a freelancer or 1099 contractor, you need to start preparing yourself for the upcoming tax season. After all, it is entirely up to you to file and properly handle your taxes. When you are an employee, some of your wages are automatically removed to pay for your taxes. As a freelancer, you get paid in full from your clients. This means taking care of your self-employment taxes, quarterly estimated taxes, track expenses, and organize all of your receipts.
With that said, I’m here today to help you make your 1099 tax filing as easy as possible.
Pay Your Quarterly Taxes
The United States operates on a pay-as-you-go system. So, as a self-employed worker, when you make money, you are required to pay taxes on them throughout the year. Quarterly taxes make it easier to pay off your tax liability for the year. Instead of paying one giant sum at the end of the year, you can pay a reduced estimated tax fee four times a year. Here is when you need to pay estimated taxes.
| Payment Period | Due Date |
| January 1 – March 31….. | April 15 |
| April 1 – May 31….. | June 15 |
| June 1 – August 31….. | September 15 |
| September 1 – December 31….. | January 15* of the following year |
Mark your calendars because you could face some serious late filing penalties if you miss the quarterly tax payment due date.
Track Your Expenses
As a freelancer, it’s absolutely vital you track your business expenses so you can lower your tax liability at the end of the year.
Excel spreadsheets are an excellent way to track both income and expenses for very small businesses with minimal cash inflows or outflows.
Make a spreadsheet with four columns, labeled date, item, cost, and receipt. Make a note of where the receipt is located and use this to track every business expense you have.
As a taxpayer, you do not need to record your personal expenses for tax purposes. It is smart, though, to keep track of your expenses for your own financial needs.
From the very start of your business or contract work, keep a detailed log of what you are getting paid, who is paying you, and what they are paying you for.
To keep track of all of these expenses, take pictures and save all receipts. Many people have a physical folder to hold their paper receipts and a folder in their phone to store screenshots of electronic receipts that were emailed to them.
FAQs For Self-Employment Income
Here are some additional answers to common questions that come up for this topic:
- How to Determine if You Earn Self Employment Income
Follow these bullets to determine whether or not you will be reporting a 1099 on your taxes.
Freelancer:
- You do not receive benefits such as health insurance and paid time off by any specific entity
- You set your schedule and choose your jobs
- You determine your pay rate and you bill your clients for your work
- You receive one or more 1099-NEC tax forms each year
- You are in charge of paying all of the necessary expenses for your business
Employee:
- Your pay rate is determined by a company other than you
- You receive health insurance, paid time off, and other benefits
- You do not choose your schedule, and it is managed by someone else
- Other people assign work to you
- You receive one or more W2 tax forms each year
- You are not responsible for personally paying the necessary expenses for your business.
- How to Find Out How Much You Owe in Income Tax
The amount of taxes that you will owe will depend on a number of different factors. Your income tax bracket will determine how much you will have to pay, along with the amount of money that you made and the number of deductions you were able to write off.
You will have to pay different types of taxes. These include your federal income taxes, your state income taxes, your self-employment taxes (Social Security and Medicare taxes), and your local taxes based on your location.
The self-employment tax rate does not vary depending on your tax bracket or your physical location. It is the same across the country.
Your self-employment taxes include Social Security and Medicare. They are also called FICA, or Federal Insurance Care Act. You will pay the employee and the business portion of this tax when you file your taxes. The current rate is 15.3%, with 12.4% going to Social Security and 2.9% going to Medicare.
The Self Employment Tax Exemption is the only exception to having to pay these taxes.
- Penalties For Not Reporting Your Income
If you underpay your taxes by not reporting all of your income, you can receive a 20 percent penalty on them for major accuracy issues. It includes improperly reporting your taxes, ignoring IRS rules, claiming benefits that are false, or failing to disclose assets. Not reporting income from a 1099 falls into this category.
We hope this helps clear things up.
1099 Deadline
The 1099-NEC e-filing deadline for 2021 took place on March 31, with paper filing due to the IRS by March 1, 2021. With the deadlines came a set of new filing dates, rules, and forms. It is crucial to send 1099s to the correct recipients and file these tax forms to the IRS as soon as possible.
Note: There are different deadlines for different types of 1099 forms. The deadline depends on the type of 1099. Other common 1099 forms you may file include the 1099-MISC, 1099-B, and 1099-INT. It depends on the nature of your business and your financial dealings.
Employers must be responsible and stay on top of changes the IRS issues. Your vendors, freelancers, and contractors are depending on your expediency for their own financial records. The IRS has made it clear that any late filings will be charged a penalty, which gets expensive.
If you’re a freelancer or independent contractor, here’s what you should know about the 1099 deadlines, penalties, and state filing requirements in 2021.
Online and Paper Filing Deadlines for 1099s
The newest form for the 2020 tax year, the 1099-NEC, provides nonemployee compensation to payees for $600 or more. Businesses must send the 1099-NEC to individuals by February 1, 2021, either electronically or on paper. Only certain hardship conditions will warrant an extension for this form, but otherwise, there is no automatic 30-day filing extension for the 1099-NEC.
Some 1099 forms are due to the IRS by March 1, 2021, if filed by mail, and some by March 31, 2021, if e-filed. It depends on the 1099 form.
1099 Filing Penalties If You Miss the Due Date
There are several reasons why the Federal Government may penalize your tax form.
Reasons include:
- Filing late.
- Not filing at all.
- Not filing the correct forms.
- Not filing electronically.
- Not providing a recipient copy.
If a form is intentionally filled out incorrectly or disregarded with major errors, there is a minimum fine of $570 per form.
If you do not file the 1099 tax form on time, your business may face penalties between $50-$570. The late fee penalties are broken down by the length of the delay.
- Penalty per Tax Form
- Delay Length
Intentional neglect to file
For small businesses, they may face a penalty of up to $1,113,000 maximum depending on the penalty. If your business has earned $5 million or less on average annually for the past three years, the IRS will consider it a small business.
There are also state penalties, which vary state-by-state. Individuals will need to check specific state websites to know how much the penalties are.
State Filing Requirements
There are new state filing requirements to take into consideration as you file your taxes for 2021. Since states vary in their filing specifications, it is critical to check state websites for the most updated information. However, here is a breakdown of the states by filing requirement.
States Combining the 1099 series Federal/State Program
- Alabama
- Arizona
- Arkansas
- California
- Colorado
- Connecticut
- Delaware
- Georgia
- Hawaii
- Idaho
- Indiana
- Kansas
- Maine
- Maryland
- Massachusetts
- Michigan
- Minnesota
- Mississippi
- Montana
- Nebraska
- New Jersey
- New Mexico
- North Carolina
- North Dakota
- Ohio
- South Carolina
- Vermont
- Virginia
- Wisconsin
States without the 1099-NEC filing requirement
- Alaska
- Florida
- Illinois
- Louisiana
- Nevada
- New Hampshire
- North Carolina
- New York
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
States requiring a 1099-NEC filed if you withheld state tax
- Maine
- Maryland
- Minnessota
- Nebraska
- New Jersey (if you made payments of $1,000 or more or withheld state tax)
- North Carolina
- Utah
- West Virginia
States requiring a separate 1099-NEC filed
- Delaware (if you paid for work performed in Delaware)
- Hawaii
- Iowa
- Oklahoma
- Oregon
- Washington D.C.
It is crucial to note that there are no uniform requirements for states. Filing requirements will differ, and it’s essential to check the state-specific guidelines for filing the 1099 form. Many states have already released such guidelines to help those wanting to file the new 1099-NEC tax form.
Now You Know the Due Dates for 1099s
Though the due date for the 2020 tax year may have passed, knowing what to expect when filing the 1099 form is always important.
Though the federal requirements are the same for each individual, state filing is not automatic and will require extra steps. The different penalties and state requirements are critical to be aware of, so be sure to check your state’s website for more information.
Filing the new 1099-NEC may seem confusing at first, but it is straightforward to fill out. Even if you have already filed for the 2020 tax year, preparing ahead for the next tax season can help you avoid penalties and any additional fees for filing the wrong forms or turning them in late.
FAQ for 1099 Forms
Here are some answers to some of the most common questions about 1099 forms.
Who is required to receive a 1099?
Form 1099-NEC must be issued to any sub-contractors or vendors that you’ve paid a minimum of $600 in services, rent, awards, and prizes, or other income within the 2020 tax year.
What happens if you don’t report a 1099?
If the amounts reported on all 1099-NECs are greater than the amount you reported as gross revenue, the 2021 IRS will go after the remaining taxes you owe. Even if you don’t receive Form 1099, you are still responsible for paying your taxes. Be sure to include those earnings in your tax return.
Do I have to report all 1099 income?
Yes, you are required to report all 1099 payments because the IRS considers them to be taxable income. As an independent contractor, even if you earned less than $600, you still need to report your earned amount as self-employment income.
What happens if I get a 1099 after I file my taxes?
Even if you fail to receive a copy of your 1099 from the payer, the IRS will still most likely have your income information for you. All you need to do is report your self-employment income on your tax return. As long as you do self-report, you are not required to do anything else.
Disclaimer: Tax rules frequently change and are highly specific to your situation. Please consult a qualified tax professional.