How to Calculate Taxes on a 1099

Don't forget to calculate any tax you owe on 1099 income.

A 1099 form is part of the Internal Revenue Service's Information Reporting Program, which requires businesses to report to the IRS any non-employee income they paid you over the course of the year. You have the legal obligation to pay taxes on certain 1099 payments. By Jan. 31, entities must mail you a 1099 form showing the total amount they paid you the previous year. Different payments are reported in this manner, from death benefits to royalties and IRA distributions.

Step 1

Add all the income amounts on your 1099 form. Royalties, for instance, will be in Box 2 and income you received as an independent contractor will be in Box 7. If the payer withheld state and federal taxes, the amounts will be in Boxes 16 and 4. Do not include taxes withheld in your total. If you have more than one 1099, combine the total income from all of them.

Step 2

Total all your expenses related to the payments reported on a 1099. Deduct the total expenses from the total income. If you're a writer, for instance, and you bought paper, toner and a new computer for $2,000 the same year you received $32,000 in 1099 payments, your net income was $30,000.

Step 3

Multiply the result of your subtraction in Step 2 by 0.9235 to calculate the amount of your 1099 income that's taxable. If your net income is $30,000, multiply 30,000 x 0.9235. Your taxable earnings are $27,705.

Step 4

Find the tax you owe on your taxable income using the IRS tax table for the year you're paying your taxes. In 2009, for instance, you'd have been liable for income taxes in the amount of $3,741 if you were single and had $27,705 in taxable earnings. Go to IRS.gov or call 800-829-1040 for the tax table you need (see References).

Step 5

Figure out the state income tax you owe on your 1099 earnings. Tax schedules and calculation methods vary from state to state. Contact your state's department of revenue for instructions on calculating taxes on your 1099.

Things You'll Need

  • 1099 form

  • Calculator

  • Internet with computer access

  • Expense receipts

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