One of the many advantages of paying your freelancers through Upwork is that you should not be required to file U.S. tax forms (W-2, 1099-MISC, etc.) for those freelancers.
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:
- employ the freelancer and assign them to provide services to you,
- 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.
If you classify your freelancer as an independent contractor, you don’t need to file a Form 1099-MISC for your payments to them through Upwork. While all freelancers submit their information for Form W-9 (U.S.-based) or Form W-8BEN (international) to Upwork, Upwork doesn’t send freelancers Form 1099-MISC, either. We do file a Form 1099-K when applicable (to freelancers who are U.S. Persons and receive over $20,000 with more than 200 transactions through Upwork).
Why don’t I have to send a 1099-MISC?
Under the Internal Revenue Code Section 6050W, you don’t need to file Form 1099-MISC for freelancers paid through Upwork because you’re not paying your freelancer directly.
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 Section 6050W. This means we (not you) 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.
Even if your freelancer does not receive enough payments for Upwork to file a Form 1099-K for them, you still don’t file a 1099-MISC because you’re actually paying a “third party settlement organization” rather than your freelancer.
For your records, you may access your annual billing history from your Reports > Transaction History.
This article does not address all the tax issues related to 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.