A 1099 is a US information return a business files to report money paid to someone who is not an employee. The most common version for freelancers and independent contractors is Form 1099-NEC (Nonemployee Compensation). A client must issue one when it pays a contractor $600 or more in a tax year (this reporting threshold rises to $2,000 from 2026 under the 2025 law, then adjusts for inflation).
Unlike a W-2 employee, a 1099 contractor has no tax withheld. You are responsible for both income tax and self-employment (SE) tax (15.3%: 12.4% Social Security plus 2.9% Medicare), usually paid through quarterly estimated payments. SE tax applies once net earnings reach $400.
Example: You net $50,000 from contract work. SE tax is charged on 92.35% of that: $50,000 × 0.9235 × 15.3% ≈ $7,065. On top of that you owe federal income tax on your profit (you can deduct half the SE tax). Missing quarterly deadlines can trigger underpayment penalties.
Estimate what you owe with the 1099 tax calculator, and compare related terms in the self-employment tax and estimated tax entries.