How to Report Self-Employment Income Without a 1099

To report self-employment income without a 1099, you need to use an alternative tax form: 1040 Schedule C. Knowing how to report self-employment income without a 1099 is important because it keeps you from missing the tax deadline and potentially incurring penalties.

While this type of reporting is common if you haven’t received a form from your employer or client, it is not a valid excuse for neglecting your tax obligations.

So, keep reading this article if you want to know how to report your self-employment income and file taxes even without receiving a proper 1099 IRS form.

Key Takeaways

• To report self-employment income without a 1099 form, you need to file Form 1040 Schedule C, calculate your net earnings, and subtract the correct self-employment tax rates.
• Some of the most common variations of the 1099 self-employed form include 1099-NEC, 1099-MISC, 1099-DIV, 1099-INT, and 1099-R.
• Use Line 1 on Schedule C to report cash income and tips. Not reporting all annual earnings, whether cash-based or not, is considered illegal.

What is the 1099 Form & Who Should Receive It?

The 1099 form actually represents a group of IRS forms used to report non-employment income or payments, such as earnings from freelancing, royalties, dividend income, awards, and prizes.

There are several variations of the 1099 form, but the ones self-employed taxpayers most commonly use are the 1099-NEC and 1099-MISC.

So, let’s go over the most common 1099 form variations in more detail:

• 1099-NEC. It reports earnings worth $600 or more paid to freelancers and independent contractors. Sole proprietors who are taxed as an LLC sole proprietorship may also receive a 1099-NEC.

• 1099-MISC. This Form 1099 variation is used to report miscellaneous payments to workers or individual taxpayers not included in a company’s payroll.

• 1099-DIV. Businesses with stocks or investments that collect at least $10 in dividend income receive a 1099-DIV from their bank.

• 1099-INT. The 1099-INT is for taxpayers reporting interest income, particularly individuals and businesses who own investments or accounts that yielded over $10 in interest within the tax year.

• 1099-R. The Form 1099-R reports retirement benefit distributions, pensions, profit-sharing plans worth $10 or more, and annuities.

Freelancers or independent contractors, government agencies or similar entities, and businesses typically receive a 1099 form. In some instances, employees who receive a W-2 form may also receive a 1099 form if they take on freelancing projects to earn extra income.

Situations Where You Don’t Get the 1099 Form

On the other hand, there are also instances wherein you may not receive a 1099 form, not because your client or employer forgot. It may simply be because your earnings, dividends, or interest income did not meet the minimum income requirements needed to receive the form.

For instance, if you were paid less than $600 as a freelancer or earned less than $10 in royalties, broker payments, dividend income, or interest income, then you are less likely to receive a Form 1099.

What is a Self-Employment Income?

Self-employment income is any payment or earnings you make from your business, sole proprietorship, or trade partnership, such as a limited liability company (LLC). You can also earn self-employment income from projects and tasks you take on as an independent contractor or a consultant.

Determining whether your non-employee income counts as self-employment income is a crucial component of learning how to report self-employment income without a 1099 form.

That said, here are some common self-employment income examples:

• Client payments from fulfilling independent contractor jobs
• Royalties
• Sales or profit from selling, supplying, or manufacturing raw materials to other businesses
• Income generated from selling consumer goods
• Trade income from partnerships

If you rent your room, apartment, or residential space through AirBnB, Vrbo, Booking.com and other similar online marketplaces, the payment you receive from your guests is also considered self-employment income.

On the other hand, the IRS does not count income from interest, dividends, and brokering investment securities as any form of self-employment earnings.

Should You Still Report Your Taxes Without the 1099 Form?

Yes, you should still report your taxes even without a 1099 form because the IRS requires taxpayers to report all types of payments and income they receive within the tax year.

Failure to file your taxes or report your earnings could lead to facing penalties and accumulating tax debt.

If you are wondering how to file self-employment taxes even if you did not receive the appropriate Form 1099 variation, you can use Form 1040 Schedule C instead.

You must report all of your self-employment earnings on Schedule C. In the same manner, business owners and sole proprietors should use the same form to report all profits and losses incurred while operating their business.

You are also required to file Form 1040-SE to determine your quarterly or estimated tax payments for the year.

How to Report Self-Employment Income Without a 1099 in 6 Steps

To report self-employment income without a 1099 form, you must have a complete record of all the payments you received or self-employment earnings you made within the year.

Let’s go into detail with the steps explained below:

#1. Keep Your Records Organized

By keeping complete and up-to-date records of your income and taxes, you can avoid instances wherein you forget to report a small amount of income.

You also stay prepared in case you make the mistake of mixing up earnings you received from the previous year with your income for the current tax year.

Moreover, having organized documentation of all your profits and losses means you have solid proof to show to the IRS in case you face financial constraints that keep you from paying your self-employment taxes on time.

#2. Calculate Your Net Income

Before you learn how to report self-employment income without a 1099 form, perhaps it would be best to determine your total gross earnings for the year first.

To calculate your net self-employment earnings, you must subtract your essential and ordinary business expenses from your gross income. If your total net income is $400 or more, then you must pay self-employment tax.

According to the IRS, 92.35% of the net income you generate from being an independent contractor, freelancer, or sole proprietor is subject to self-employment taxation.

#3. File a 1040 Schedule C Form

To file a 1040 Schedule C Form, you must report all income or profit and losses that you incurred from self-employment during the year.

You’ll also need the following information to fill out your Form 1040 Schedule C:

• Social Security Number (SSN)
• Employer Identification Number (EIN)
• Balance sheet
• Income statement
• Business receipts, specifically those that show proof of purchase for your trade
• Mileage records
• Inventory

If you receive any other form of income, such as a fuel tax credit or refund, you must include the said information in your Schedule C as well. Don’t forget to itemize all business expenses and check your qualifications for specific tax deductions.

#4. Deduct Business Write-Offs

Since you are learning how to report self-employment income without a 1099 form, you might as well take the time to identify all the different tax write-offs that apply to your self-employment earnings and expenses.

Depending on the type of business or freelancing that you do, you may qualify for several different types of deductions. Some of the most common write-offs for self-employed taxpayers include home office, health insurance, self-employment tax, vehicle use, and travel deductions.

You can also check out our article about the different tax deductions for independent contractors for a more in-depth guide.

#5. Pay Self-Employment Tax

Once you’ve calculated your net earnings and itemized all applicable deductions, the next step in reporting self-employment income without a Form 1099 is to pay your self-employment tax.

Self-employment tax includes Social Security and Medicare taxes, or FICA taxes. The combined tax rates for Social Security and Medicare taxes for self-employed individuals are 15.3% (12.4% for Social Security and 2.9% for Medicare).

However, if your self-employment income falls above a specific income threshold, you may be subject to paying additional Medicare taxes. The income threshold for self-employment income is based on your filing status.

#6. Submit Your Tax Return

Before you submit your tax return, you must check and verify that all information and calculations on your income and taxes are correct. Otherwise, a single mistake could affect your returns in the succeeding tax years.

If possible, you may seek the assistance of a tax professional or consult with a certified accountant to avoid miscalculating your tax deductions, net earnings, and the total amount of taxes owed.

How to Report Cash Income and Tips

Use Line 1 of Schedule C to report all cash income and tips. Understandably, it can be even trickier to report self-employment income without a 1099 if you receive payments for your services in cash.

However, it is crucial to report all income you receive on your tax return, regardless of whether you are reporting cash income from odd jobs or tips from your freelancing gig. Omitting your cash earnings on your return is illegal because it qualifies as a form of underreporting your annual income.

Besides, itemizing all of your earnings for the year increases your chances of increasing your contribution limits to retirement and health savings accounts.

There are additional steps you must take to report cash income and manage your tax returns:

• Record all your cash earnings. Use Form 4070-A, Employee’s Daily Record of Tips to report cash income and tips. The said form lets you document all your tips and cash income on a daily basis.

• Separate personal and business expenses. It is also important to separate your business expenses from your personal expenditures, since only business-related costs are valid for a possible tax deduction or credit.

• Fill out Schedule C. Add and input all of the cash earnings you received on Line 1 of Schedule C, “gross receipts or sales.”

• Use Form 8300. If your business received at least $10,000 in cash in a single or in multiple transactions, you must file Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business.

Now that you know the definitive answer to the question, “Can I report income without a 1099?” let’s take a closer look at the possible consequences of not reporting cash earnings in the next section.

What Happens If You Don’t Report Your Cash Income?

You will potentially face penalties for not reporting your cash income. The IRS can tell if you underreported your annual earnings. In fact, they use different methods to analyze taxpayers’ or businesses’ reported earnings and expenditures.

Examples of ways in which the IRS can detect that you did not report all of your cash income include:

T-account Analysis

The T-account analysis entails comparing all reported earnings in one column with the expenses you itemized in another column. The IRS will then examine whether your expenditures match or make sense with the amount of income that you declared.

If the discrepancies total $10,000 or more, the IRS will summon you for a field audit or a face-to-face investigation.

Bank Deposit Analysis

The IRS may request records of your deposits to scrutinize whether there are any traces of unreported earnings reflected on your account.

Business Financial Ratios

The IRS uses websites such as Bizstats to compare the financial ratios between businesses selling the same goods or providing similar services.

If you fail any of the tests described above, you may face any of the two accuracy-related penalties: negligence or disregard of the rules or regulations or substantial understatement of the income tax penalty.

Both penalties charge 20% of either an underreported tax or an underreported return.

3 Tips For Reporting Self-Employment Income Without a 1099

Aside from knowing the steps and alternative IRS forms in reporting your self-employment earnings, below are additional tips to ensure you check all the necessary boxes when filing your tax return:

#1. Document Everything

It is better to stay prepared and well-equipped when tackling financial matters related to your job, trade, and tax duties. If possible, create paper and electronic copies of your financial documents to avoid losing key data about your hard-earned money.

#2. Use Online Tools

You can also use online tools such as Paystub.org’s 1099 form generator, paystub generator, and invoice generator.

Generating the form is a convenient alternative for when you don’t receive an official 1099 IRS form. Meanwhile, our paystub generator enables independent contractors to record all payments received from clients and freelance projects.

Finally, our invoice generator is the perfect, cost-effective accounting tool for small businesses.

All of our generators are 100% secure and safe to use and they come with ready-made templates that you can easily fill in with all the relevant income and tax information in minutes.

Once you’re done filling in the templates on your preferred tool, you can preview the document for one last check, and then download as many copies as you need.

#3. Read Up On Tax Regulations

It is not enough to know how to report self-employment without a 1099, as you must also understand the different regulations imposed by the IRS on regular employees, businesses, and independent contractors.

For instance, you must know when to use 1099 forms or a Form W-2.

Similarly, there may be specific state tax rules and instructions that you must follow, depending on your location.

Final Thoughts

Reporting self-employment income without a 1099 form entails a longer process than when you receive the correct Form 1099 for your earnings.

However, staying well-informed of the alternative tax forms and steps you can take to report your earnings minimizes errors on your tax return. Lastly, you can rest assured that your tax and income records remain accurate, spotless, and free from any suspicion from the IRS.