Business owners hiring independent contractors must provide them with 1099-MISC forms by January 31 following the end of a tax year. If you earned at least $600 working as an independent contractor, the business that paid for your services must send you and the IRS a 1099-MISC form.
As noted by SmartAsset.com, independent contractors earning less than $600 from a business during the year may not receive 1099-MISC forms. These individuals must, however, report their earnings on their income tax returns. When performing contract work for different businesses, you may receive a 1099-MISC form from each one if they paid you $600 or more during the year.
Calculating gross income and deductions
The IRS generally views freelancers or independent contractors as it views self-employed individuals. Whether performing work for a business as a sole proprietor or through a limited liability company, your Form 1040 tax return may need to include a Schedule C.
Calculate your gross income by adding up all your 1099-MISC forms and entering it on Schedule C. Include any other income not covered by a 1099-MISC form. According to IRS.gov, independent contractors may deduct necessary expenses such as licenses, insurance and transportation. If you work from home, you could deduct a portion of your mortgage or utilities from your gross income.
Filing self-employment returns and taxes
Because the IRS considers independent contractors as self-employed, your tax return may require a Schedule SE. This form reports the Medicare and Social Security tax liability incurred for the year.
When net earnings from self-employment exceed $400, the IRS may require Schedule SE. If independent contractors incur annual self-employment taxes of $1,000 or more, the IRS may also require making quarterly estimated tax payments.