1099.

In plain English

Form 1099 is actually a family of forms (1099-NEC, 1099-MISC, 1099-INT, 1099-DIV, and others) that report income other than wages. The most common is the 1099-NEC, which businesses issue to freelancers and independent contractors who earned $600 or more from them in a year. Banks issue 1099-INTs for interest paid; brokerages issue 1099-DIVs for dividends and 1099-Bs for sales of investments.

01Why it matters

If you receive 1099 income, no taxes were withheld for you. You're responsible for paying federal income tax, state tax (if applicable), and both the employer and employee halves of Social Security and Medicare tax (combined: 15.3%, called self-employment tax). This usually requires making quarterly estimated tax payments to avoid underpayment penalties.

02The math, step by step

You earn $50,000 at a regular job (W-2) and $15,000 freelancing on the side (1099-NEC). The freelance income owes federal and state income tax (at your marginal rate) plus 15.3% self-employment tax, roughly $2,300 more than the W-2 equivalent. You can deduct the employer half (7.65%) above-the-line, and you may be able to deduct legitimate business expenses, but the math is meaningfully different.

Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.

03What this is NOT

04Receipts

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