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What Is a 1099 Form?

A 1099-NEC (Non-Employee Compensation) is the tax form clients use to report payments made to independent contractors. If you received $600 or more from any single client during the tax year, they're required by law to send you a 1099-NEC by January 31 of the following year.

Unlike a W-2, which reports wages after taxes are withheld, a 1099 reports the gross amount paid to you — before taxes. That's why self-employed people often owe more at tax time: no one has been withholding taxes on your behalf throughout the year.

What to Do When You Receive a 1099

When a 1099 arrives, match the amount against your own income records. Clients sometimes make errors. If the amount on the form doesn't match what you were actually paid, contact the client to request a corrected 1099.

Report the income accurately on your tax return regardless of whether you receive a 1099. The IRS receives a copy of every 1099 sent to you. Even if a client fails to send the form, you're still obligated to report the income.

What If You Don't Receive a 1099?

You may not receive a 1099 if: - A client paid you less than $600 in the year - A client paid you via credit card or PayPal (those payments are reported separately on a 1099-K by the payment processor) - A client simply didn't send one (non-compliance)

In all these cases, you're still required to report the income. "I didn't get a 1099" is not a valid reason to omit income from your tax return.

Self-Employment Tax on 1099 Income

This is where many contractors get an unpleasant surprise. Regular employees pay 7.65% of wages toward Social Security and Medicare, and their employer pays a matching 7.65%. As a self-employed person, you pay both halves — 15.3% in self-employment tax on top of your regular income tax.

You can deduct half of the self-employment tax you pay when calculating your adjusted gross income, which softens the impact somewhat. But the bottom line is: you should set aside significantly more of each payment than an employee would.

Keeping Records That Match Your 1099s

Track every payment you receive throughout the year, including the name of the client and the amount. When 1099s arrive in January, reconciling them against your records takes minutes instead of hours.

A-book lets you record each income source as you receive it, tag clients who issue 1099s, and generate a year-end summary that makes tax preparation straightforward — whether you file yourself or work with an accountant.