Am I responsible for filing tax forms for my freelancer?

One of the many advantages of paying your freelancers through Upwork is that you should not be required to file US tax forms (W-2, 1099-MISC, etc.) for those freelancers.

Independent Contractors

If you classify your freelancer as an independent contractor, you don’t need to send or file a Form 1099-MISC for your payments to them through Upwork. All freelancers must submit information for Form W-9 (US-based) or Form W-8BEN (international) to Upwork and we will file a Form 1099-K, if applicable.

Why don’t I have to send a 1099-MISC?

Under the new Internal Revenue Code Section 6050W, clients that use Upwork are no longer required to file Form 1099-MISC for freelancers paid through Upwork. Because you are not paying your freelancer directly, the general principle that you should send a 1099-MISC when paying for services does not apply.

When you pay your freelancer on Upwork, you actually pay Upwork Escrow Inc., which is our licensed escrow subsidiary. Upwork Escrow Inc. acts as a third party settlement organization under Internal Revenue Code Section 6050W. As a third party settlement organization, we are required to report the payments we remit to your freelancer to the Internal Revenue Service (IRS) on Form 1099-K, in accordance with IRS regulations.

Those regulations provide that, because you pay your freelancers through us—instead of paying them directly, we are required to file Forms 1099-K and you do not have to report those payments on Form 1099-MISC. This is true even if your freelancer does not receive enough payments for us to report on them specifically. The fact that we are a third party settlement organization required to make these reports is the determining factor.  

Employees

If you believe that your Upwork freelancer is best classified as an employee, you should use Upwork Payroll. When you use the Upwork Payroll service, our staffing provider will:

  • act as employer of record,
  • handle all of the withholding and payment of taxes, and
  • provide the worker with a Form W-2

Note: You should determine proper classification of all of your U.S.-based freelancers based on IRS guidelines and other federal, state, and local regulations.

More Information

For your records, you may access your annual billing history from your Reports > Transaction History.


This article does not address all the tax issues for freelancers and it cannot and should not be relied upon as legal advice.  Readers are strongly encouraged to seek tax advice based on their particular circumstances from an independent tax advisor.


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