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What are 1099 forms?

Form 1099s are also known as Form 1099-K or Form 1099-NEC. Both 1099 forms report the business income you received during the tax year to the IRS.

 

If you're using FreshBooks Payroll powered by Gusto, Form 1099-NEC can be accessed from in your payroll settings under Tax Documents. 

 

 

Form 1099-K

The Form 1099-K is an IRS form that reports online payments made by payment cards and third-party network transactions. It’s the responsibility of these online payment gateways to file and provide copies of the 1099-K to both businesses and contractors involved in the transactions. Learn more about each payment gateway’s process for providing a Form 1099-K below:

 

Form 1099-NEC

The Form 1099-NEC is an IRS form that reports income earned in freelance work or contract labor during the tax year. 1099-NEC forms are required for:

  • Businesses that pay more than $600 annually to anyone who isn’t a direct employee
  • Businesses that receive more than a combined total of $600 during one financial year from the same client
  • Review the list of payments made or payments received that require a 1099 form
  • We recommend checking with your accountant or tax professional to ensure you’re fully compliant with your 1099 obligations

 

For Business Owners/Employers

As a business/employer and the payee, it’s your responsibility to report payments over $600 made to contractors to the IRS. You’ll need to provide a copy of one of the Form 1099-NECs to both the IRS and to the contractor/freelancer.

To do this, you’ll need two things: the amount you paid your contractor, and a blank template of the Form 1099-NEC to fill out.

If you haven't been logging contractor payments as expenses, you can get started using How do I create an expense?. Then run a filtered Expense report to find the total paid with the below steps:

  1. Select the Reports section
  2. Under Invoice and Expense Reports, select the Expense Report
  3. Select Filters under Settings
  4. In the Date Range dropdown, choose your date range
  5. For Group By, choose between Category (e.g., contractors) or Merchant (name of contractor)
  6. Select Apply to finish
  7. Using the filtered Expense report, you can then use the totals to fill in your Form 1099-NEC.

 

For Contractors and Freelancers

As a contractor, it’s your responsibility to report your taxable income to the IRS. If you’ve received more than $600 while working as a contractor for someone, you’ll need to reach out to your clients/employers to get a Form 1099-NEC. It’s important to report your income as accurately as possible because your clients will also provide a copy to the IRS.

It can be helpful to send your client an Invoice Details report from your FreshBooks account to ensure they have accurate information on how much they paid you over a reporting period. Run a filtered Invoice Details report with the below steps:

  1. Select the Reports section
  2. Under Invoice and Expense Reports, select Invoice Details
  3. Select Filters under Settings
  4. In the Date Range dropdown, choose your date range
  5. Next, under Clients, choose your employer and select Apply to finish
  6. Select the Send... button and email it to your client/employer.

 

Blank Form 1099 Templates

For US businesses, use the below templates:

 

For Canadian businesses, the 1099 is called a T4A in Canada. You can use the CRA’s template to download, fill out, and file on your own.

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