Q:

How do you calculate your income taxes if you have 1099 forms?

A:

Quick Answer

Taxpayers list the information from 1099 forms on regular annual tax forms and send them to the IRS in the same way as they would from a W2 form, according to TurboTax. When filing tax returns with 1099 forms,taxpayers must use a Schedule C form.

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Full Answer

Self-employed individuals use Schedule C forms to calculate and report net profits. On a Schedule C, a person may also declare and deduct expenses that are considered necessary for running the business. If the total business expenses are less than $5,000 for the 2014 tax year, then the taxpayer can file a Schedule C-EZ, according to TurboTax. The taxpayer needs to add the earnings reported on 1099 forms to the earnings reported from any W2 forms and then subtract the deductions from the Schedule C or C-EZ from that total. Finally, the taxpayer transfers the resulting amount to the annual tax return form as what the IRS considers that person's total taxable income.

Independent contractors use 1099 forms to report income from the work they perform for their clients, as the IRS explains. The IRS considers independent contractors to be self-employed, and they must accordingly follow all tax rules for self-employed individuals. This includes filing all the proper tax forms if self-employment income totals or exceeds $400 for the tax year. Other self-employment tax forms include Schedule SE and the 1040-ES attachment, as indicated by TurboTax.

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