Is 1099-Misc same as Self-Employed?

Freelancers, contractors or other consultants, even if they work part-time on the side, can often have a more complex tax situation than the standard employee.

You are an independent contractor in the eyes of the IRS if you receive a Form 1099-MISC. This form documents your earning from a specific client, as opposed to a standard employee’s W-2. The IRS considers anyone who receives a 1099-MISC to be self-employed, whether as a freelance writer or an Uber driver.

If you are considered a “nonemployee” to the payer, they aren’t required to include benefits, Social Security contributions, or income tax withholdings, which means you may make more money than a salaried employee.

However, because the payer doesn’t provide these things, you’ll be required to handle it yourself. You may be able to deduct some relevant costs of developing, maintaining and growing your business.

Independent contractors have to be diligent in their record keeping – ensuring business expenses and personal expenses are always kept separate. If at first glance the IRS doesn’t approve your deductions, there’s a chance you may get audited.