1099

A 1099 is one of several IRS forms reporting income you received outside of a regular payroll relationship, most commonly freelance or contract work. Unlike a W-2, no taxes are withheld from 1099 payments, so the entire tax obligation, including self-employment tax, falls on you.

The form you'll run into most is 1099-NEC (Non-Employee Compensation), sent by any client who paid you $600 or more in a year. But the 1099 family also covers interest (1099-INT), dividends (1099-DIV), and retirement distributions (1099-R), each reported separately.

Because nothing is withheld upfront, 1099 income usually means quarterly estimated tax payments to avoid a penalty. The Self-Employment Tax Calculator breaks down what you'll owe on top of regular income tax.

Self-Employment Tax = Net 1099 Income × 92.35% × 15.3%

The 92.35% adjustment accounts for the employer-equivalent portion of the tax, and the 15.3% covers Social Security (12.4%) and Medicare (2.9%) combined. This is separate from, and in addition to, regular federal income tax on the same income.

Jordan earned $45,000 in 1099-NEC income as a freelance designer in 2026, with $5,000 in deductible business expenses.

• Net self-employment income: $45,000 − $5,000 = $40,000
• Self-employment tax base: $40,000 × 92.35% = $36,940
• Self-employment tax: $36,940 × 15.3% ≈ $5,652

Jordan still owes regular federal income tax on top of that $5,652, calculated on the net income after half of the self-employment tax is deducted above the line.

• The $600 threshold is about reporting, not taxability. Income under $600 from a single client still counts as taxable income even without a form.
• 1099-NEC replaced 1099-MISC for contractor pay. Since 2020, non-employee compensation goes on 1099-NEC; 1099-MISC now covers things like rent, royalties, and legal settlements.
• Multiple 1099s from different clients all get combined. There's no per-form filing, everything rolls into your total self-employment income for the year.
• Quarterly estimated payments avoid an underpayment penalty. If you expect to owe $1,000 or more, the IRS expects payments in April, June, September, and January, not one lump sum at filing.
• Half of self-employment tax is deductible. You get an above-the-line deduction for the employer-equivalent half of your self-employment tax, which lowers your income tax bill even though it doesn't reduce the self-employment tax itself.