Filing as an Independent Contractor (1099)

Filing taxes as an independent contractor isn’t just about plugging in numbers—your entity choice, deductions, and tax software all play a role. John Briggs shows you how to keep more of your hard-earned money instead of handing it over to the IRS! 💰
 
And remember...the #IRSSUCKS

John Briggs | Tax Genius
info@incitetax.com
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Chapters

• 0:00 Introduction
• 0:29 Importance of Using a Professional
• 0:47 Choosing the Right Business Entity
• 1:20 How Your Entity Affects Tax Filing
• 2:10 Tax Software Considerations
• 3:29 Maximizing Tax Savings with a Professional
• 4:00 Tracking Business Income
• 4:38 Choosing the Right Bookkeeping Software
• 5:11 Understanding Your Responsibility
• 5:49 Generating Financial Reports
• 6:00 Final Thoughts

Transcript

If you receive a 1099-NEC, 1099-MISC, or any other form of income that isn’t reported on a W-2, you are considered an independent contractor.

In general, you need all the documents tied to your Social Security number because the IRS receives this information, and you are responsible for reporting it.

If you’re trying to file your taxes yourself, I’ll do my best to help. However, I know this may sound biased, but if you're an independent contractor, you should use a professional. A large portion of the tax code—especially the parts open to interpretation—directly applies to independent contractor income.

The first challenge is choosing the right entity. Should you file as an LLC? Report your income on a Schedule C as a sole proprietor? File a separate return as an S corporation or a partnership? I can't answer that question for you in a general video, but we’ve covered this topic extensively in previous content, so be sure to check that out.

We strongly encourage you to avoid sole proprietorship status. At a minimum, setting up an LLC is a good step. Once you choose the right entity, you’ll need to file your independent contractor activity accordingly:

• If you are a single-member LLC, you file on a Schedule C.
• If you have more than one member in your LLC, you file a partnership return.
• If you make an election in either of these situations, you may need to file as an S corporation.

The right entity choice can save—or cost—you thousands in taxes, so talk to a professional to make sure you're making the right decision. Our goal is to keep money in your pocket rather than handing it over to the IRS.

If you’re doing this yourself, you need tax software that includes the necessary forms. Popular options include TurboTax, TaxSlayer, and TaxCut. However, be cautious—many companies advertise "free" filing but sneak in hidden fees. If you read the fine print in their commercials, you’ll often see that most people don’t qualify for free filing. They typically don’t reveal the actual cost until you’ve already entered all your tax information.

Not all tax software includes a Schedule C by default—sometimes, it requires an upgrade. If you need to file a business return, make sure the software allows you to file for a partnership, S corporation, or even a C corporation if necessary. Do your research before choosing tax software to avoid unexpected costs and limitations.

As an independent contractor, you are responsible for tracking your income. Not all income may be reported on a 1099-NEC or 1099-MISC. If you are audited, the IRS will examine your bank deposits, so make sure your reported income matches your business deposits.

Tracking deductions (or expenses) is just as important. If your business has minimal activity, you may be able to track expenses using an Excel file. However, if you have a lot of transactions, QuickBooks Online is a great option. We don’t recommend other bookkeeping software as much, but you should pick what works best for you.

A word of caution: QuickBooks Online is user-friendly, but that can sometimes lead to mistakes. Many independent contractors miscategorize expenses, which means they don’t claim the right tax deductions. Even if you hire a bookkeeper, you are ultimately responsible for your records. If the IRS audits you, they will hold you accountable—not your bookkeeper.

Once you’ve tracked your income and expenses, you can generate a profit and loss statement. In some cases, you may also need a balance sheet, especially if you purchased equipment and want to maximize tax savings.

After organizing this information, input it into your tax software, and it will calculate your taxable income.

Filing taxes as an independent contractor is complex, but that complexity offers opportunities to save money. The tax code favors business owners, so take advantage of the rules available to you. If you’re unsure about any part of the process, work with a professional to ensure you’re making the best financial decisions.