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1099 Form
Definition
A tax form issued to self-employed workers and independent contractors reporting non-employment income.
Explanation
Unlike W-2s (which represent wages), 1099s are issued to freelancers, contractors, and self-employed individuals to report non-employment income. Common types include 1099-NEC for freelance work and 1099-DIV for dividends.
Recipients are responsible for paying their own taxes since no withholding occurred. Self-employed individuals typically pay estimated quarterly taxes using the 1099 income reported.
Example
A freelance designer receives 1099-NEC forms from 3 clients totaling $60,000 and must pay self-employment tax on the full amount.