What is a 1099 contractor?

You signed up to drive for DoorDash, took on your first client, or got paid a commission instead of a salary, and somebody called you a 1099 contractor. Nobody explained what that means. In short, it means that for taxes you work for yourself, even if you never think of it that way.

This piece explains where the name comes from, how to tell whether it fits you, and what changes when you file. The sources are listed at the end.

The short answer

A 1099 contractor is someone who is paid for work but is not an employee. The IRS’s own term is independent contractor, and its general rule is that you are one “if the person for whom the services are performed has the right to control or direct only the result of the work and not what will be done and how it will be done.”

In practice: the client or the app decides what has to get done, and you decide how, when and with what. Nobody takes tax out of what they pay you, and the IRS treats your earnings as income from your own small business.

Where the “1099” comes from

The number is the name of a tax form. A business that pays a contractor sends that person a form from the 1099 family early the next year, and sends the IRS a copy.

Form	Who sends it	When
1099-NEC	A business that paid you at least $2,000 during 2026 for your work (the limit was $600 until the end of 2025)	By January 31, or the next business day
1099-K	A payment app or online platform that paid you more than $20,000 in more than 200 payments during the year	By January 31, or the next business day

Gig platforms differ: depending on the platform and what it paid you for, a rideshare or delivery driver may get a 1099-NEC, a 1099-K, or both.

The form is a report, not the reason you owe tax. With the 1099-NEC limit raised to $2,000, a client who paid you less than that in 2026 does not have to send one at all, and the income still counts. The IRS is plain about it: gig income has to be reported on a tax return even when no form was issued for it, “paid in any form, including cash, property, goods, or virtual currency.”

1099 or W-2: how to tell

The other kind of worker is the employee, named after Form W-2, the wage statement an employer sends each January. The differences that matter day to day:

In practice	W-2 employee	1099 contractor
Who decides how the work is done	The employer	You
Tax taken out of each payment	Yes	No
Social Security and Medicare	Split with the employer	All yours, as self-employment tax
Car, phone and tools	Usually the employer’s, or paid back	Yours; the share used for work is deductible
Where the income goes on your return	The wage line of Form 1040	Schedule C, as business income

When it is not obvious, the IRS looks at three things:

• Behavioral control. Does the company control, or have the right to control, what you do and how you do it?
• Financial control. Who decides how you are paid, whether expenses are paid back, and who provides the tools and supplies?
• The relationship. Is there a written contract, are there employee benefits such as a pension, insurance or paid vacation, and is the work a key part of the company’s business?

Contractor work often looks like driving for rideshare and delivery apps, selling real estate on commission, freelance design or writing, or trade work for clients you find yourself. The label in your contract does not decide it, though: the facts do. If you and the company cannot agree, either of you can ask the IRS to decide with Form SS-8, which the IRS says takes at least six months.

You can also be both in the same year. A salaried job and weekend deliveries make you an employee for the job and a contractor for the deliveries, and only the second is a business on your return.

What changes at tax time

Nobody withholds anything. An employer takes income tax out of every paycheck. A client or an app pays you the full amount, and the tax is still owed. It is due when you file, or through the year as estimated tax.

You pay self-employment tax. This is Social Security and Medicare for people who work for themselves: 15.3%, which is 12.4% for Social Security and 2.9% for Medicare. It is figured on 92.35% of your net earnings, and you owe it once those earnings reach $400 for the year. On $24,000 of profit that is about $3,391, on top of income tax. Half of it is then deducted from your income, which lowers your income tax a little.

Your business gets its own schedule. Contractor income and expenses go on Schedule C, Profit or Loss From Business. What is left after expenses is your profit, and both income tax and self-employment tax are figured on that.

You may have to pay as you go. If you expect to owe $1,000 or more when you file, you generally have to pay estimated tax during the year, with Form 1040-ES. For 2026 the payments are due April 15, June 15 and September 15, 2026, and January 15, 2027.

The upside: your costs come off first

An employee pays tax on the whole wage. A contractor pays tax on profit, so the costs of doing the work come off first. Each $100 of business expense saves about $14 of self-employment tax, and income tax on top of that at your rate.

For anyone who drives for work, the car is usually the biggest cost. Business miles are deducted at the IRS standard mileage rate: in 2026, 72.5¢ a mile through June 30 and 76¢ from July 1. A thousand business miles in the fall is $760 off your profit. Two rules come with it. The drive from home to a regular workplace is commuting and never counts. And the IRS expects a record of each drive: the date, the miles, where you went, and the business reason.

This is also why it matters which kind of worker you are. Since 2018 an employee cannot deduct work driving the employer does not pay back, at least on a federal return, apart from a few groups such as Armed Forces reservists. For a contractor the same miles come off business income.

The bottom line

A 1099 contractor is paid for results, not managed like an employee, and the 1099 is the form that reports the pay. The taxes nobody takes out become yours to pay, including self-employment tax and, past $1,000, quarterly estimates. In return, the costs of your work, and the business miles above all, come off before any of it is figured.

Sources

• IRS, Independent contractor defined: the general rule.
• IRS, Independent contractor (self-employed) or employee?: behavioral control, financial control, the relationship, and Form SS-8.
• IRS, Instructions for Forms 1099-MISC and 1099-NEC: the $2,000 limit and the January 31 deadline.
• IRS, Form 1099-K threshold: more than $20,000 and more than 200 transactions.
• IRS, Gig Economy Tax Center: gig income is reported even without a form.
• IRS, Topic 554, Self-employment tax: the rate, the $400 line and the deduction for half.
• IRS, Estimated taxes and the payment dates.
• IRS, Instructions for Form 2106: why most employees can no longer deduct unreimbursed work expenses.

This article is general information, not tax advice. Tax situations vary, so check with a qualified professional before you file.