1099-NEC Tax Preparation: How to Save More Money as a Freelancer

Don't worry—here are some answers to help you understand what to do with your 1099-NEC form and how to maximize deductions to keep more of your hard-earned money.

The 1099-NEC (Non-Employee Compensation) is a tax form businesses use to report payments of $600 or more made to people who aren't their employees. If you're a freelancer, independent contractor, or self-employed person, you'll likely receive this form from each client who paid you $600 or more during the tax year.

The form shows how much money you earned from that client, which you must report on your tax return. Remember, even if you earned less than $600 from a client (and didn't receive a 1099-NEC), you still need to report all income on your tax return.

When you receive a 1099-NEC form, follow these simple steps:

If you find any errors on your 1099-NEC, contact the business that issued it right away to request a ‘corrected’ 1099-NEC form.

Situation: You just started freelancing this year and received your first 1099-NEC.

Solution: Set up a separate business bank account immediately to track income and expenses. Start using a mileage tracking app for all business travel. Save 25-30% of your income for taxes. Consider making quarterly estimated tax payments to avoid penalties.

Situation: You work entirely from home but haven't claimed a home office deduction.

Solution: Measure your dedicated workspace to calculate the percentage of your home used for business. Use the simplified option ($5 per square foot, up to 300 square feet) if you're just starting out. Keep utility bills, rent/mortgage statements, and home insurance documents to support your deduction.

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Situation: You received 1099-NECs from several clients but haven't tracked which expenses apply to which income source.

Solution: Create a spreadsheet to categorize expenses by client or project. Use time-tracking software to document hours spent on each client. This helps allocate shared expenses proportionally and identifies which clients generate the most profit after expenses.

Situation: You create digital content and have purchased equipment but aren't sure what's deductible.

Solution: Track all equipment purchases (cameras, lighting, computers, software subscriptions) with receipts. Items over $2,500 may need to be depreciated rather than expensed immediately. Consider Section 179 deduction for immediate write-off of qualifying equipment up to certain limits.

Situation: You drive for rideshare or delivery services but haven't kept detailed records.

Solution: Start using a mileage tracking app immediately. For past miles, reconstruct records using service history, calendar appointments, and bank statements. Track car washes, phone mounts, and portion of cell phone bill used for gig work. Save receipts for snacks/meals provided to customers.

Situation: You have a full-time job with W-2 income but also received a 1099-NEC for side work.

Solution: Adjust your W-4 withholding at your main job to cover additional taxes from freelance income. Alternatively, make quarterly estimated tax payments on freelance earnings. Keep business expenses separate from personal expenses, even for part-time freelancing.

Many freelancers and independent contractors miss valuable tax deductions. Here are legitimate business expenses you might be overlooking:

"Always keep receipts and document the business purpose of each expense. A good rule is to note who, what, where, when, and why for any business expense you plan to deduct."