What Form Does an Independent Contractor Fill Out?

Independent contractors operate their own businesses and provide services to various clients. Unlike employees who have taxes withheld from their paychecks, independent contractors manage their own tax obligations. This involves understanding and using specific tax forms issued by the Internal Revenue Service (IRS). These forms help track income and ensure proper tax reporting and payment throughout the year.

Providing Your Tax Information to Clients

Independent contractors often begin their relationship with a client by completing Form W-9, “Request for Taxpayer Identification Number and Certification.” This form provides the independent contractor’s Taxpayer Identification Number (TIN) to the entity or business (the payer) that will be compensating them. The TIN is typically the independent contractor’s Social Security Number (SSN) or, if they have one, an Employer Identification Number (EIN).

The Form W-9 requires the independent contractor to provide their full legal name, any business name, and their current address. They must also indicate their federal tax classification, such as individual/sole proprietor or single-member LLC, and certify the information is correct. The independent contractor submits this form directly to the client, not to the IRS. Clients use the W-9 information to prepare other necessary tax documents, like Form 1099-NEC, at the end of the year. Form W-9 can be obtained from the IRS website or is often provided by the client.

Understanding Your Income Statements

Clients paying independent contractors often issue Form 1099-NEC, “Nonemployee Compensation,” to report payments made for services. This form details the total amount of nonemployee compensation paid to the contractor during the calendar year. The 1099-NEC includes the payer’s information, the independent contractor’s information (including their TIN), and the total amount of compensation. This form is required if a business pays an independent contractor $600 or more for services in a year.

The client is responsible for issuing Form 1099-NEC to the independent contractor by January 31 of the year following payment. A copy is also sent to the IRS. Independent contractors use the information from the 1099-NEC to accurately report their gross income when filing their own tax returns. Even if a 1099-NEC is not received for all income sources, contractors must still report all income earned from self-employment activities.

Reporting Your Self-Employment Income

Independent contractors report their business income and expenses primarily on Schedule C (Form 1040), “Profit or Loss from Business (Sole Proprietorship).” This form calculates the net profit or loss from self-employment activities. To complete Schedule C, independent contractors gather records of their gross receipts or sales, which may come from 1099-NEC forms and other payment records. They also list various business expenses, such as advertising, office supplies, and professional services, to reduce their taxable income.

The net profit or loss from Schedule C flows to the independent contractor’s personal income tax return (Form 1040). Additionally, independent contractors use Schedule SE (Form 1040), “Self-Employment Tax,” to calculate their self-employment taxes. This tax covers Social Security and Medicare contributions, reflecting both the employee and employer portions typically split in an employment setting.

Paying Estimated Taxes

Since taxes are not withheld from their income, independent contractors are required to pay estimated taxes throughout the year. This ensures they meet their tax obligations as income is earned, avoiding a large tax bill at year-end. Form 1040-ES, “Estimated Tax for Individuals,” is used to calculate and make these quarterly payments. It includes a worksheet to estimate expected adjusted gross income, taxable income, and deductions for the year.

Estimated tax payments are due on specific dates: April 15, June 15, September 15, and January 15 of the following year. Payments can be made:
Online through IRS Direct Pay
Via the Electronic Federal Tax Payment System (EFTPS)
By mail with a payment voucher from Form 1040-ES
Through tax software

Paying enough estimated tax on time helps avoid potential underpayment penalties.