Do Self-Employed Individuals Get a W-2?
Discover why self-employed individuals don't receive W-2s and navigate income reporting and tax payment requirements for independent contractors.
Self-employed individuals do not receive a W-2 form for their income. A W-2, or Wage and Tax Statement, is specifically issued by employers to report wages paid to employees and the taxes withheld. Since self-employed individuals operate their own businesses and are not considered employees, they are responsible for reporting their income and paying their own taxes directly to tax authorities. This distinction is important for understanding how income and taxes are handled for those working independently.
Worker Classification
The Internal Revenue Service (IRS) distinguishes between an “employee” and an “independent contractor,” which directly impacts how income is reported and taxed. An employee typically has their work controlled by an employer, including how, when, and where the work is done. Employers withhold income tax, Social Security, and Medicare taxes from an employee’s paychecks and report this on a W-2 form.
In contrast, an independent contractor controls the manner and means by which they perform their services. The IRS evaluates the relationship between the worker and the business using three categories: behavioral control, financial control, and the type of relationship. Behavioral control examines if the business has the right to direct or control how the work is accomplished through instructions or training. Financial control looks at whether the business controls the financial aspects of the job, such as unreimbursed expenses or investment in tools. The type of relationship considers factors like written contracts or employee benefits.
Reporting Self-Employment Income
Self-employed individuals must accurately report their business income and expenses to the IRS. The primary form used by sole proprietors and single-member Limited Liability Companies (LLCs) is Schedule C (Form 1040), Profit or Loss from Business. This form allows taxpayers to detail their gross receipts or sales and then deduct allowable business expenses to arrive at a net profit or loss from their business activity. Common deductible expenses can include office rent, utilities, supplies, and vehicle expenses if used for business purposes.
Self-employed individuals may receive information returns like Form 1099-NEC, Nonemployee Compensation, or Form 1099-MISC, Miscellaneous Information, from clients. These forms are typically issued when a client pays $600 or more for services during the year. These forms report income paid to the self-employed individual and are used to help them report their gross income on Schedule C. Even if a self-employed individual does not receive a 1099-NEC or 1099-MISC, they are still required to report all their business income on Schedule C. Maintaining thorough records of all income and expenses is crucial for accurate reporting and for substantiating deductions in case of an audit.
Self-Employment Tax and Estimated Payments
Self-employed individuals are responsible for paying self-employment tax, which covers both the employer and employee portions of Social Security and Medicare taxes. This tax is calculated on Schedule SE (Form 1040), Self-Employment Tax, based on net earnings from self-employment. For 2025, the self-employment tax rate is 15.3%, consisting of 12.4% for Social Security and 2.9% for Medicare. The Social Security portion applies to net earnings up to a certain annual limit, which is $176,100 for 2025, while the Medicare portion applies to all net earnings.
Due to the absence of employer withholding, self-employed individuals typically need to make estimated tax payments throughout the year to cover their income tax and self-employment tax obligations. These payments are usually made quarterly using Form 1040-ES, Estimated Tax for Individuals. The general quarterly due dates are April 15, June 15, September 15 of the current year, and January 15 of the following year. Payments can be made online through IRS Direct Pay, the Electronic Federal Tax Payment System (EFTPS), or via the IRS2Go app, among other methods. Failing to pay enough tax through withholding or estimated payments can result in an underpayment penalty; however, taxpayers can generally avoid this penalty if they owe less than $1,000 in tax after credits and withholding, or if they pay at least 90% of the current year’s tax liability or 100% of the prior year’s tax, whichever is smaller.