Can I Get a Tax Refund with a 1099? | Freelance Taxes Explained
A Quick Overview: About 1099 Forms
You received a 1099 form and are wondering what to do with it. Can you get a tax refund with a 1099? This is not a yes or no question, it very much depends on your situation. In most cases, you would only receive a 1099-NEC if you’ve done work or provided a service that you were paid over $600 for. Depending on which one of the following, your tax situation will vary. Are you a(n):
Independent contractor, doing only contract work full time? I.e. you paint houses under your own business and receive payments from various clients.
Typically in this situation, you would not receive a tax refund–because you haven’t been “pre-paying” taxes via withholding, so you should actually owe taxes.
A full-time employee with some side income? I.e. you have a full-time job as a graphic designer–occasionally you take on your own clients and make designs for them, and are paid over $600 by one or multiple clients.
Typically in this situation, if your side income is small compared to your full-time job, your tax situation would be unaffected. Meaning, if you usually get a refund, you would probably continue to receive a refund and also vice versa (if you owe taxes, continue to owe). Note that this can vary a lot depending on your W4 withholding (set a lot of taxes aside, versus not a lot per paycheck).
| Type | Independent Contractor, 1099 Work Only | Full-time job, with side-income |
|---|---|---|
| What: | Receive 1099-NEC forms from clients | Receive W2 from employer and 1099-NEC forms from clients |
| Tax Refund? | Typically no-you probably actually owe taxes, because you did not "pre-pay" taxes via regular paychecks | Tax situation is usually unchanged (if you typically get a refund or owe, you will continue to). This is because you are "pre-paying" taxes via regular paychecks as an employee |
| Exceptions/notes: | You may not owe taxes if you are making Estimated Quarterly Tax payments. You should be calculating and making these payments if you are an established freelancer with signficant income. |
If your withholding level is low (you don't prepay a lot of taxes on your paycheck), your additional side income could make you owe taxes |
Independent contractors–how do taxes work if I only do contract work?
Taxes for independent contractors, or freelancers, work differently. First of all, you don’t receive regular paychecks and you also don’t receive a W2 at the end of the year. Instead, you should receive 1099-NEC forms from each client that has paid you over $600.
So, you might be wondering “Can I get a tax refund with a 1099?”. The short answer is–typically no.
As an independent contractor, you won’t have tax withholdings (money that is “pre set aside” from your paycheck to pay for taxes) like an employee would. This means that you get paid the full amount for your work/services, without any taxes having been paid. Let’s see an example:
A full-time employee gets paid $2,000 on their bi-weekly paycheck, it would look something like this:
Gross pay: $2,000
minus Federal taxes withheld: $500
minus State taxes withheld: $250
minus Social Security, Medicare, Medicaid (FICA) withheld: $125
Total net (take-home) pay: $1,125
An independent contractor gets paid $2,000 for a project they completed:
it would simply be the full $2,000 paid via check, electronic transfer, or an invoice you sent out paid via CC or ACH. In this example, you’ve not set aside $875 of taxes between Federal, State and FICA taxes.
So, you might be wondering “If I file a 1099, will I get tax money back?”
In this scenario where you only did contract work, you absolutely would not get a tax refund, in fact, you owe a lot of taxes. This is because you were paid $2,000 and you have not yet paid any taxes on that amount, versus an employee who would have had taxes withheld from each paycheck throughout the year. Keep in mind that we are simplifying the situation and these do not take into account any deductions.
No–this is not unfair. You can think of full-time employees always “pre-paying” their taxes, versus independent contractors not pre-paying.
So, what should you be doing as an independent contractor?
Quarterly Tax Payments | How to Pay Your Taxes as a Freelancer
As a freelancer, things are not as “automatic” for us. If you make significant income, you need to be estimating your annual income and making quarterly tax payments at the Federal level, and also at the State level (if applicable, some states don't have income tax). You can do this a variety of ways, but the simplest way is to just:
Open a spreadsheet, estimate your annual income
Multiply your annual income by the appropriate tax rate. This will be a number of different rates based on the tax brackets. For example, if you made $45,000 here’s what Federal taxes would look like:
| Tax rate | Taxable Income Range | Amount owed |
|---|---|---|
| 10% | $0 to $9,950 | 10% of taxable income |
| 12% | $9,951 to $40,525 | $995 plus 12% of the amount over $9,950 |
| 22% | $40,526 to $86,375 | $4,664 plus 22% of the amount over $40,525 |
| 24% | $86,376 to $164,925 | $14,751 plus 24% of the amount over $86,375 |
| 32% | $164,926 to $209,425 | $33,603 plus 32% of the amount over $164,925 |
| 35% | $209,426 to $523,600 | $47,843 plus 35% of the amount over $209,425 |
Your taxable income: $45,000 - $12,550 (Federal standard deduction) = $32,450
Tax liability is:
$995 plus
any amount over $9,950, or: 12% x ($32,450 - 9,950) =
$2,700
Your Federal Tax Owed: $3,695
Divide this amount by 4 = $923.75 and make this payment each quarter. You can do this online at IRS DirectPay
Repeat the steps 2 and 3, but with the State tax rates instead and pay at your corresponding State electronic payment portal
Here are the general Federal deadlines for making these payments:
| Period | Due Date | For Months |
|---|---|---|
| 1st Quarter | April 15th | January - March |
| 2nd Quarter | June 15th | April - June |
| 3rd Quarter | September 15th | July - September |
| 4th Quarter | January 15th, of next year | October - December |
Now, let’s talk about situations where you may have both a full-time job and also perform some contract work.
Full-time employees with additional income source | Can I get a tax refund?
In this scenario, it’s very possible that you could still get a tax refund if you receive a 1099-NEC? Why is this? Because as we explained above, a full-time employee has taxes withheld from every paycheck throughout the year.
For many, the tax withheld is often more than what they actually owe when tax liability is calculated at the end of the year, this is why there are even tax refunds in the first place.
Whether you will actually get a tax refund depends entirely on multiple factors:
What is your withholding rate? This is dictated by your W4 form, filed with your full-time job’s HR/payroll department
How much did you get paid as side-income? Is it a lot compared to your full-time job, or only a small amount? If a small amount, it’s unlikely you will change your net tax liability at EOY.
What are your deductions? Do you have large itemized deductions you can claim that would lower your tax liability?
Examples of the numbers, in detail (simplified, no deductions taken into account):
Full-time employee with adequate withholdings and side-income:
Annual gross pay: $80,000
Side-income pay: $5,000
Total pay: $85,000
Taxes owed (est. 30%): $25,500
Taxes withheld throughout the year from paychecks: $30,000
Tax liability/refund = $25,500 - $30,000
Tax refund: $4,500.
Side income had no effect on tax liability, individual still gets a tax refund, just a smaller amount due to added side income
Full-time employee with some withholdings and side-income:
Annual gross pay: $80,000
Side-income pay: $5,000
Total pay: $85,000
Taxes owed (est. 30%): $25,500
Taxes withheld throughout the year from paychecks: $25,000
Tax liability/refund = $25,500 - $25,000
Tax owed: $500
Due to smaller withholdings, side income had an effect on tax liability, individual now owes $500 in taxes
FAQs:
Does 1099 help or hurt my tax return?
A 1099 neither “helps” or “hurts” your tax return. If you received a 1099, it’s simply income. If you have more income, you generally have to pay more taxes–but that’s better than not having extra income so it’s not “hurtful”
How much will I pay back in taxes 1099?
Exactly how much you pay in taxes from receiving 1099s entirely depends on your situation. Income from 1099s are subject to the same taxes as any other income, like at a full-time job. The exception is with 1099s, you have to pay the full self-employment tax of 15.3%, but you can claim half of it as a deduction. Many 1099 workers can actually reduce their tax liability more through eligible expenses when compared to their full-time worker counterparts.
How do I get the most money back from 1099?
As a 1099 worker, you’re able to use eligible expenses as a deduction against your income. Here are some common deductions:
Standard mileage deduction, if you use your car
Health insurance premiums
Work supplies (paper, pens, organizational items)
Work travel (meeting clients, going to conferences)
Business insurance
Software (Adobe Photoshop, QuickBooks)
Home office (portion of your home use exclusively for work, like 15% of rent)
