If you're a freelancer whom the Internal Revenue Service (IRS) defines as a “U.S. Person” and earn money working with your client through Upwork, you need to report this income on your tax return. However, most freelancers won't receive any tax forms from their contracts on Upwork.
This content applies specifically to U.S. Persons. If you are not a U.S. person, you are responsible for complying with the rules and regulations in your own jurisdiction. You may wish to consult with a trusted tax expert or advisor. Upwork cannot provide tax advice.
Form 1099-MISC and Form 1099-NEC
Starting in tax year 2020, non-employee compensation should be reported on a Form 1099-NEC instead of a Form 1099-MISC. Freelancers—including those who earned more than $600—will not receive a Form 1099-NEC or 1099-MISC from Upwork. Your clients are not required to send you a 1099-NEC or 1099-MISC, either.
Most freelancers won't receive any tax forms from their contracts on Upwork.
Employees paid through Upwork Payroll
If you and your client agreed that you are an employee, you must be hired through Upwork Payroll. When you use the Upwork Payroll service, our staffing provider will be the employer, handle all of the withholding and payment of taxes, and provide a Form W-2.
Freelancers who are U.S. Persons and receive over $20,000 with more than 200 transactions through Upwork
Qualifying freelancers will receive a form called the Form 1099-K (not to be confused with the more common 1099-MISC). Under the Internal Revenue Code Section 6050W, Upwork will file a Form 1099-K form with the IRS for you, and you will receive a copy of your Form 1099-K via U.S. Postal Service by January 31. Remember that only those who have received over $20,000 in gross payments across more than 200 incoming transactions will receive a 1099-K. If you don’t meet the minimum payment threshold and/or transaction count, you will not receive any type of 1099 form. For example:
- Took in $25,000 as 25 payments of $1,000 each? No 1099-K would be sent
- Took in $2,500 as 250 payments of $10 each? No 1099-K would be sent
- Took in $25,000 as 250 payments of $100 each? U.S. persons would receive a 1099-K
A 1099-K is a record of payments, not earnings. In accounting terms, this is a “gross” total rather than “net.” As such, it includes all payments to the freelancer on all contracts. This includes funds you may have then paid to Upwork as fees or to your clients as refunds rather than withdrawing. For example:
- Received $25,000, but refunded $500, $6,000, or even all $25,000? It doesn’t matter. We have to use the total before fees and refunds
- If you received $100 from a new client for a contract, the full $100 would count towards the 1099-K total (not the $90 in earnings left after you paid $10 to Upwork in service fees). That means if you had $100 contracts with 250 different clients, you’d have $25,000 in payments on your 1099-K
Tip: The membership and service fees you pay to Upwork may be tax-deductible business expenses and refunds may not be considered “earnings” for tax purposes. Because the 1099-K is a record of payments only, what you report as income/earnings to the IRS may differ from the amount on this form.
- For total payments received, use the Transaction History report filtered by credits
- For total billings (including fees, but subtracting refunds), use the Lifetime Billings by Client report
This article does not address all the tax issues for freelancers and it cannot and should not be relied upon as legal or tax advice. Readers are strongly encouraged to seek tax advice based on their particular circumstances from an independent tax advisor.