What a 1099 Is, and What to Do When One Shows Up
If you work for yourself, sooner or later a form with "1099" in the name will land in your mailbox or inbox. It can feel ominous. It isn't. A 1099 is just a report the IRS gets a copy of, showing that someone paid you money. The work of figuring out what you owe on it happens on your own tax return.
Here's what each kind means, when you'll see one, and what to do with it.
What a 1099 actually is
It's an information return. A business or platform that paid you reports the total to the IRS, with a copy to you, so the IRS knows you received that income. They are not bills, and they are not pre-filled tax returns. They are reminders.
The two you'll most likely see
There are about twenty different 1099 forms, but as a solo pro you'll see two of them most often.
Form 1099-NEC is for contract work. If a client paid you directly (not through a payment platform) for services, they're supposed to send you a 1099-NEC. Starting with the 2026 tax year, the issuing threshold is $2,000 or more in payments over the year. For 2025 and earlier the threshold was $600. The change was part of the One Big Beautiful Bill Act passed in July 2025.
Form 1099-K is for payments processed through a card or payment app. Stripe, Square, PayPal, Venmo (business), and similar platforms send you this when your processed payment volume crosses a threshold. The federal threshold is currently more than $20,000 and more than 200 transactions in the year. Many people had been bracing for a $600 number; it was repealed before it ever took effect.
Two important caveats:
- Direct card payments don't have a federal minimum. If your processor handles credit, debit, or gift card payments for you, they can still issue a 1099-K with no minimum at all.
- Some states use lower thresholds. Massachusetts, Vermont, Maryland, Virginia, Illinois, the District of Columbia, and New Jersey all currently require platforms to issue 1099-Ks at much lower amounts than the federal rule. If you live in one of those, expect to see a form even on modest volume.
Once a 1099 is filed, the IRS already has the number
This is the part people miss. The form isn't just for you. The IRS gets the same copy you do, and their computer compares it against what you report on your return. If you leave the income off, expect a letter eventually.
That's also why a 1099 is not optional reading. Open it. Make sure the dollar amount matches what you actually received. If your return shows $34,000 in income and the IRS has 1099s totaling $42,000, you're going to hear about it.
What you actually owe on a 1099
A 1099 is not a tax bill. It's a number that goes onto your Schedule C (or equivalent), where you'll subtract your business expenses. What's left is your net profit, and that's what gets taxed.
You'll owe two things on that net profit:
- Income tax, at your normal federal and state rates.
- Self-employment tax, which is 15.3% on top, covering Social Security and Medicare. Half of it is deductible. See the self-employment tax explainer for the full breakdown.
The combined hit usually lands somewhere between 25% and 35% of your net profit, depending on your state and your total income. That percentage is the number to keep an eye on, not the 1099 itself.
When the number on the form is wrong
It happens. The most common reasons:
- A platform reported gross payments without subtracting refunds you issued.
- A platform reported processing fees as part of your income.
- A client lumped reimbursed expenses into your contract pay.
- A duplicate was issued (you received two copies of the same income).
Contact the issuer first. Ask for a corrected form and keep your own records of what was actually paid. If they won't fix it, you can still report the correct amount on your return, but you'll need to be ready to explain the difference if the IRS asks.
The footnote no one tells you
You owe self-employment tax and income tax on your business income whether or not a 1099 is issued. The 1099 is paperwork. The obligation comes from earning the money. A client who paid you $1,500 in cash isn't required to send a 1099-NEC under the new $2,000 rule, but you still owe tax on the $1,500.
Keep your own records of every payment, in every form (cash, Zelle, Venmo, app, card), and report your real income. The IRS will never know about the cash payment unless you tell them, but the obligation exists either way, and the gap between your reported income and your actual lifestyle is one of the easier things for them to spot.
If that part makes you sweat, build the tax math into your weekly routine instead of waiting for forms to arrive in January. ApptOnly's Finances page shows a live tax reality check based on your year-to-date revenue, so you can see what to set aside as the year goes. A Financial Tools upgrade, in development now, will turn that estimate into a state-tuned reserve.
This isn't tax advice. Tax rules change and individual situations vary. Talk to a CPA for guidance specific to your business.