One advantage of paying your freelancers through Upwork is that you can avoid the hassle of having to file U.S. tax forms (W-2, 1099-MISC, 1099-NEC, etc.) for those freelancers.
If you believe that your Upwork freelancer may be best classified as an employee based on the factors of your work relationship, or if you are unsure of the proper classification, you should use Upwork Payroll or Upwork’s Any Hire service.
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
- Provide the worker with a Form W-2
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 need help with classification, consider using Upwork’s Any Hire.
If you classify your freelancer as an independent contractor, you don’t need to file a Form 1099 for your payments to them through Upwork. All freelancers submit their tax information for Form W-9 (U.S.-taxpayer) or Form W-8BEN (non U.S.-taxpayer) to Upwork, and we file a Form 1099-K for them when applicable — which applies to freelancers who are U.S. Persons and receive at least $20,000 through Upwork in a year with at least 200 transactions. That $20,000 is a total gross amount of all the freelancer’s contracts.
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.
Frequently Asked Questions
Under the Internal Revenue Code Section 6050W, you don’t need to file Form 1099-MISC, 1099-NEC, or 1099-K 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 or 1099-NEC because you’re actually paying a “third-party settlement organization” rather than your freelancer.