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8 Min. Read

Upwork 1099 Tax Form: Filing Requirements and Steps

Upwork 1099 Tax Form

An Upwork freelancer who receives at least $600 in client payments in 2022 will receive a 1099-K form from Upwork by January 31, 2023. The rule applies to all U.S. taxpayers. If you’re new to Upwork and are still wondering how to pay taxes as an independent contractor working on this platform, this article is for you.

Given that filing taxes and knowing the accounting terms can be challenging, we’re here to help. Although we can’t provide legal or tax advice, we’ll try to clarify the steps and requirements needed to receive and file the form.

Table of Contents

Why Is Upwork 1099-K Important?

How to File Upwork 1099-K

Upwork 1099-K Requirements

How to Get 1099-K Form From Upwork

Key Takeaways

Frequently Asked Questions

Why Is Upwork 1099-K Important?

Independent contractors in the U.S. are legally obliged to pay estimated taxes using form 1099-K. With this form, the contractor reports the gross payments income they made on Upwork for 1 calendar year.

As a freelancer working on Upwork, the platform doesn’t withhold any taxes from your income. You may be required to make tax estimations to cover self-employment taxes. So the responsibility for paying taxes falls solely on you as the independent contractor.

This form is the only way to report income to the Internal Revenue Service (IRS) when filing taxes.

The 1099-K form includes all business expenses like shipping, sales taxes, card processing fees, canceled orders, and more.

According to tax laws in the U.S., you must file the 1099-K form if you earn more than $600 on Upwork from January 1 to December 31 in 1 year. This threshold is the total gross amount for all your contracts for all your transactions.

For example, if you work on 3 contracts and earn $250 for each, you’ll receive the 1099-K from Upwork. The 1099-K represents a record of all payments you receive in a calendar year and doesn’t only refer to the funds you withdraw.

So these are your gross payments rather than net payments in accounting terms. They include the Upwork fees you pay, as well as refunds you issue to clients for Upwork payments.

Say that you receive a $25,000 payment from a client. Then, you refund them any amount ($5,000 or $25,000). Upwork payroll service will use the total income ($25,000) to report to the IRS.

Also, if one of your contracts is worth $100, and you have $10 (or 10%) for Upwork fees, the whole amount of $100 will be included on your 1099-K.

You need to earn $600 annually with Upwork to receive a 1099-K form. But even if you don’t receive this form, you still must report income.

Former employees for U.S. companies who worked for a fixed salary or hourly rate are familiar with W-2 forms. The 1099-K is similar to it, with the exception that it doesn’t list wages for consistent hourly and salary payments. Instead, it includes all transaction sales on Upwork.

This form is also important because it’s needed for filing state taxes. Different states have different sale thresholds. Also, some states need Upwork payroll service to send the IRS the federal copy of the 1099-K.

Currently, ten states have a minimum payment threshold on the 1099-K:

  • Arkansas – $2500
  • Alabama – $1500
  • Missouri – $1200
  • New Jersey – $1000
  • Illinois – $1000 or more than 4 transactions
  • District of Columbia, Maryland, Mississippi, Massachusetts, Virginia, and Vermont – $600

The rules above only apply to U.S. persons. Foreigners working on Upwork have to submit a Form W-8BEN or W-8BEN-E on the platform. They should also comply with tax laws in their own countries or jurisdictions.

The Easy Way To Pay Your Team

How to File Upwork 1099-K

You can follow the easy steps below to get your transaction history:

  1. Log into your Upwork account and open the “Reports” tab.
  2. Hit “Transaction History” from the new drop-down menu.
  3. Under “Statement period,” select a custom date range. It should be set from January 1 to December 31.
  4. Press “Download CSV” to get your entire transaction history in the Excel sheet format.

Once you receive your yearly income information, you need to find out the total percentage you need to pay.

You can find the information about your total billings, like fees, in the “Billings and Earnings” report on Upwork.

All independent contractors can deduct their business expenses from the tax bill. These tax deductions are the reason why you should keep track of your business expenses. Also, you need to separate these from personal expenses.

Even if you work on Upwork part-time, you still need to do the expense tracking for the 1099. You can do so by automating your business accounting with software like FreshBooks. This easy-to-use software makes tracking all your business expenses easy, so you’ll be prepared once the tax season arrives.

The good news is that you can use some of the expenses for tax write-offs. Some tax deductions include:

  • Computer equipment
  • Home office expenses
  • Marketing expenses
  • Meals with clients
  • Software tools and subscriptions
  • Travel expenses
  • Upwork service fees
  • Education and training expenses

If you have numerous sources of income, it’s always a good idea to hire a tax advisor. You can save money on taxes by working with these types of professionals. Also, they will find all tax deductions and tax credit solutions you can use. They are also knowledgeable about the tax laws and will save you time and stress.

In addition, accounting software for freelancers like FreshBooks makes tracking business expenses easier. It’s ideal for self-employed professionals, freelancers, or small business owners. Faster payment, easier invoicing, and accurate billing are some of its highlight features.

Upwork 1099-K Requirements

All freelancers on Upwork need to make their quarterly tax payments to the IRS. Once the tax season approaches, it’s important not to miss estimated tax payments to avoid receiving a penalty.

Software like FreshBooks can calculate your taxable income and track your business expenses with ease.

Some general requirements to receive the 1099-K include the following:

  • Being an independent contractor in the U.S.
  • Receiving over $600 in a calendar year

Before 2022, the law stated that you must fill out a 1099-K form if you earn more than $20,000 and have more than 200 transactions. This means freelancers who earned $35,000 and had 150 transactions wouldn’t receive the 1099-K form. This rule is no longer current, as the new 2022 law introduced the $600 threshold.

It’s important to note that the 1099-K is used to report payments and not earnings. Upwork needs to report all payments that are sent to freelancers, regardless of the fees and refunds paid.

Independent contractors are also required to file taxes per quarter, including:

  • By April 15, for the first quarter
  • By June 15, for the second quarter
  • By September 15, for the third quarter
  • By January 15, for the fourth quarter

Keeping track of your quarterly taxes is easy when using accounting software like FreshBooks.

How to Get 1099-K Form From Upwork

All freelancers or independent contractors will receive their 1099-K form if they are eligible. If you earn more than $600 per year and haven’t received your form yet, it could be for many reasons.

You must make sure the tax address is updated and that you have a valid Tax Identification Number (EIN, SSN, or ITIN). You should also have a completed W-9 form on the platform.

Upwork can only send you the 1099-K form when they are certain the information matches your tax ID. The IRS requires the files to be correct to avoid any misunderstandings.

Also, if you don’t provide the TIN on the W-9, Upwork will have to withhold taxes and submit them to the IRS at pre-set tax rates.

Most independent contractors receive their 1099-K by January 31 each year to cover the payments made the year before.

Upwork mails the 1099-K forms to freelancers. That’s why you should have your address updated and valid. You can update your address in the “Settings” then “Tax Information” section on your Upwork profile.

So far, Upwork hasn’t worked out the digital 1099-K form. They will have it on the platform by the end of January 2023. But they will be sending all their 1099-K forms by mail for the 2022 tax year.

Ready To Make Paying Your Team Easier

Key Takeaways

All Upwork freelancers who make more than $600 in projects per year (including Upwork fees, refunds, etc.) will receive the 1099-K Form by mail. The 1099-K Form must be filled out and turned in to the IRS on specific dates to serve as proof of paying taxes. Some states have specific thresholds regarding the form, so it’s best to check the particular requirements for your state.

When you find the proper software for keeping track of expenses like FreshBooks, filing for taxes will be much easier as a freelancer. Plus, you can always contact Upwork support for any inquiries about the 1099 Form.

Frequently Asked Questions

Does Upwork send 1099 Form?

Yes, Upwork will send the 1099 form to your mailing address if you’re eligible for it. You can expect to receive one by January 31st for the previous year.

Does Upwork send 1099-NEC?

Upwork doesn’t send 1099-NEC forms to freelancers who earn over $600 in a year. The clients of these freelancers also aren’t required to send them 1099-NEC or MISC forms.

Can I write off Upwork fees?

Yes, it’s possible to deduct Upwork fees for tax write-offs. You can count them as business expenses for taxes. Tax deductible payments include service fees, travel expenses, equipment expenses, and more.