What is a 1099 Contractor?
A 1099 contractor, or, more accurately an independent contractor, is a legal and tax-related term used in the United States to refer to the type of worker that contracts his or her services out to a business or businesses. The “1099” refers to the Internal Revenue Service (IRS) form that an independent contractor receives stating his or her income from a given business in a given tax year. A 1099 contractor is not an employee of the business or businesses with which he or she works, instead he or she is an independent contractor, or consultant, who is considered to be self-employed. Being a 1099 contractor can offer extraordinary freedoms, but, like most things, it can be considered to have some downsides as well. 1099 contractors who make more than 600 US dollars (USD) per year are issued 1099 forms from the business(es) that paid them. On their income, 1099 contractors must pay pay income and social security taxes; employees must do the same. The difference is that employers generall
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An independent contractor who is responsible for paying his own taxes. If a company uses an independent contractor then the company sends the contractor a 1099 form at the end of the year instead of a W-2. The 1099 shows how much the company paid the contractor. The company does not withhold taxes so it’s up to the contractor to pay his own taxes. He should make estimated payments to the IRS using a form 1040-ES. You can find this at www.irs.gov. Then when the contractor files taxes he has to file a Sch. C and a Sch. SE. Those are also on the irs website.
