The IRS form 1099 is one of the most crucial documents you need as a freelancer to calculate your taxable income, whether filing taxes yourself or using a tax professional. Therefore, it can be stressful when you do not get your form 1099 before the tax season.
Form 1099 makes it easy to estimate your business income and tax return. However, there is no need to panic if you do not get the form, as you can still file your taxes. You can still file accurate tax returns if you have good records of all your income within the tax year and know the tax deductions to make.
With that in mind, it is essential to know why you might fail to get the form and what to do to deal with the predicament.
Reasons for Not Getting a Form 1099
Although each situation will be different, there are some common reasons you might fail to get a form 1099 before the tax filing day. Sometimes the reason is a misunderstanding between the client and freelancer, while in some cases, it is beyond either's control.
Here are 5 possible reasons for not getting 1099 forms:
1. Your earnings for the tax year were under $600
As a freelancer or independent contractor, you will not receive a 1099 form for any job that pays you under $600 in the tax year.
Some employers might still send you a form 1099 even if they pay you less than $600, but no legal requirement compels them to do it.
However, you still need to file these earnings as part of your miscellaneous income when filing your tax form. Additionally, if the payment is less than $600 but more than $400, you must pay self-employment taxes.
IRS makes these guidelines clear and so you should not have any problem figuring things out, but tax professionals can always help you out in case you have difficulties.
2. Client forgot to send the form
Sometimes, clients can forget to send the 1099 form. This happens quite often with clients who do not deal with these tax documents a lot as they might not understand the requirement.
Therefore, in some cases, simply reminding the clients to send the form before the tax filing deadline is enough to ensure you have all the required forms.
Some clients also ignore sending the form, but this should not worry you as a freelancer as it is not your responsibility, so they are more likely to be penalized by the IRS and not you.
However, this still does not exempt you from filing your tax returns. If the client fails to send the forms, you should always use other income records to file your income tax.
3. Payment was through third-party channels
If your client pays you through third-party apps such as PayPay, Stripe and Venmo, you might not get the usual form 1099-MISC or 1099-NEC. Instead, these companies will prepare a 1099-K form for the tax year and send it before the annual deadline.
However, for most of these third-party payment platforms, you have to receive a payment of at least $20,000 and make a minimum of 200 transactions within the year to get their 1099-K form. For the 2024 tax year, this number will change from $20,000 to $5,000.
4. You did not send the W-9 form
While your clients are responsible for sending the 1099 forms to report your income for the year, they need to have your tax information to prepare the form.
The client will get this information from the W-9 form. Therefore, whether the client requests the form or not, it is essential to remember to fill it out and send it. You should also make sure you capture important information like your tax identification number and mailing address correctly.
5. Your address changed
Independent contractors and freelancers have the freedom to work from anywhere, especially when working remotely. However, if your address keeps changing, the chances are, the only reason you do not receive the 1099 form, is that it will get lost in the mail.
If you do not have a permanent address or have updated your address recently, make sure you share the new one with your clients and not just with the IRS.
What Should you Do If You Didn't Get a Form 1099?
A tax professional is always better positioned to give you tax advice when you encounter issues such as not receiving teh 1099 forms. However, there are still some simple remedies you can use to remedy the situation yourself. Here are are few of them:
1. Always remains calm
Tax preparation is a highly stressful task for any freelancer or independent contractor, and so a missing form 1099-MISC can only make things worse for you. However, there is no reason to panic, and you should always remain calm.
Remember that it is the client's responsibility to send the form, and you hardly have any role to play besides working and getting paid.
Provided you pay taxes owed, you should not have any issues with the IRS for not receiving a 1099 form. Moreover, you will not need to attach it when filling out your tax form.
2. File the self-employment income
Filing your self-employment and income tax is more important than getting 1099 forms from clients. Even if you do not get the forms, make sure you file your taxes on time and provide accurate information on your earnings.
The client might not have sent the form or got lost in the mail, but the IRS may already have a copy, meaning they already know the income you are expected to report. Your state tax authority will also be more concerned with getting accurate tax returns than forms.
3. Take proactive measures
As a taxpayer, you can help prevent problems like missing a 1099 form by remaining proactive. One of the best ways to do this is by always filling out your w-9 form and sharing it with the client whether they request you to do it or not.
A w-9 form is easy to fill out, and it will give the client all the information required to fill your 1099 form, minimizing the likelihood of not sending it.
Here are the requirements you need to fill out a W-9 form:
- Freelancer or independent contractor's name or their business name
- Mailing address
- Business structure: partnership, LLC, sole proprietor or corporation
- Tax identification number (TID)
- Signature and date
Do You Need Form 1099 to File Taxes?
The 1099 forms are an essential source of information for tax filing, and they will make it easier to determine your taxable income since they report income for the tax year.
With that said, independent contractors and freelancers can still file their taxes without using the 1099 forms, provided they have other records that keep track of their income for the year.
Documents like receipts and invoices from your payments and transactions for the tax year can help provide the information you need to file taxes.
If you do not get the 1099 form, you will be required to report the income under miscellaneous income under Section C of the 1040 tax form. This applies even to earnings under $600 as they are still part of your personal income for the tax year.
Are there Penalties for Failing to Report Form 1099 income?
Any income information you get on your 1099-MISC and 1099-NEC also goes to the IRS. When filing your taxes, you have to report all this income to ensure the IRS does not flag you for a tax audit for underreporting income.
If the tax audit concludes you omitted some taxable income, the IRS can fine you. These accuracy-related fines and penalties will equal 20% of the amount you underpaid. For example, if you have a tax liability understatement of $10,000 for the tax year, your penalty can be up to $2,000 (20% of $10,000).
What Happens to Businesses and Clients that Do Not Issue 1099 Forms?
There are consequences for businesses that do not issue 1099 forms, even if the freelancer or independent contractor will file taxes accurately.
The IRS charges a penalty of between $60 and $310 for each form not sent to the freelancer before the deadline. The actual fine depends on how many days the form is later.
The maximum fine per tax year for businesses that do not issue 1099 forms is $1,261,000. However, if the businesses ignore their responsibility to send these forms, the minimum fine is $550 or at least 10% of the income that should be reported in the form, and the IRS does not have a maximum fine limit.
The deadline for filing the 1099 forms is January 31, so clients and businesses should ensure they share the forms with freelancers and independent contractors for the year on or before this deadline.
Bottom Line
The 1099 forms make preparing your tax return less hectic for you by providing most of the data you need to determine your earnings for the year.
Sometimes, you might not receive these forms due to various reasons such as earning less than the $600 minimum and client forgetting or ignoring to send them. However, even if you do not get these forms, you still must file taxes on time.
Keeping track of your income and using other documents can help you file taxes without form 1099s, so there is no reason to panic. Also, staying proactive by tracking your income and filling out the W-9 forms will make tax preparation less hectic.
If you are still unsure what to do if you do not get the 1099 forms, make sure you get tax advice from an expert.
