1099 Form
A 1099 is an IRS information return reporting income you received outside of regular employment — such as freelance income, dividends, interest, or retirement distributions. Unlike a W-2, no taxes are withheld from 1099 income, so recipients must pay taxes themselves.
There are many types of 1099: 1099-NEC (non-employee compensation — freelance or contractor income), 1099-DIV (dividends), 1099-INT (interest), 1099-R (retirement distributions), 1099-B (brokerage sales), 1099-G (government payments including unemployment), and more.
If you earn $600 or more from a single payer as a contractor or freelancer, they must issue a 1099-NEC. Platforms like Upwork, Fiverr, Etsy, and DoorDash send 1099-K forms for payments processed through their systems.
Because taxes are not withheld from 1099 income, self-employed individuals must pay estimated quarterly taxes (due April, June, September, January) to avoid underpayment penalties.
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- W-2 Form
- A W-2 (Wage and Tax Statement) is a form employers send to employees each January. It reports total wages paid and all taxes withheld during the prior year. You need it to file your federal and state income tax returns.
- Tax Withholding
- Tax withholding is the amount your employer deducts from each paycheck and remits directly to the IRS on your behalf. It is an advance payment toward your annual tax liability — not an extra tax. If too much is withheld, you get a refund; too little, and you owe at filing.
- Gross Income
- Gross income is your total income before any taxes, deductions, or withholdings. It is the starting figure used by lenders for DTI calculations and by tax authorities to determine your tax bracket.