Bonsai provides 1099-K forms for users that fit within specific criteria (see 1099-K criteria below).
Freelancers can download a CSV of payments and expenses from the Bookkeeping dashboard, as well as view their totals for the taxable year. These can be used to help fill out any required tax forms, as well as sent to a tax professional to assist them in a tax filling.
It is important to note that freelancers are often confused about 1099s and unless you are paying subcontractors, filing an 1099 form is not a requirement for an independent contractor. A 1099 form is a requirement for your client and are typically used by freelancers just to help them calculate their income for the year.
1099-NEC and 1099-MISC
With this in mind, Bonsai does not provide 1099-NEC or 1099-MISC forms to users. This is because users are not employed by Bonsai as independent contractors, they simply use Bonsai to run their business.
It is a client's (aka employer's) responsibility to provide their independent contractor with a 1099 every year if they have paid them $600 or more in the calendar year. As of 2022, this will most often be a 1099-NEC form which is used for reporting non-employee compensation.
Clients are required to have their 1099-NEC form sent to their contractor by February 1st the following year, as well as file it with the IRS independently.
What is a Form W-9 then?
A Form W-9 is used by clients to request sensitive tax filing information from their independent contractor. Using this information (such as Social Security Number and address), they fill out their 1099 form that is later sent to the IRS and their contractor.
Because sending a Form W-9 can include sensitive information that can lead to identity theft, it is very important to know that you are sending it to the correct contact and they're actually a client of your.
Given that the Form W-9 is used by clients to request tax information, Bonsai does not send them to users, though a user may receive one from their client.
Receiving a 1099-K from Bonsai
Bonsai sends US users a 1099-K form if they process more than $600 in the year as per new IRS requirements in 2022. 1099-K forms are used to report payments as a third-party payment organization. If you receive a 1099-K form, Bonsai is required to send a copy of the same form to the IRS and/or the tax authority of your state.
Bonsai will send a 1099-K form if you fit all the following criteria:
Based in the US using Bonsai Payments
Transacted $600 or more in a calendar year on Bonsai
Depending on which state you’re located in, requirements may vary beyond these criteria.
Your 1099-K will include your "gross payments" as defined by the IRS, which are your total payments for the year including any Bonsai/transaction fees. Don't worry, though, you will not have to pay taxes on the "gross payments", only your profit after transaction fees.
More information can be found in the IRS website.
For purposes of the 1099-K tax form, the following payments are not considered in your "gross payments" on Bonsai:
Payments processed through your own PayPal account
Checks, Money orders or Bank transfers outside of Bonsai Payments
Other alternative payment methods
When will I receive my 1099-K tax form?
If you fit the required criteria, Bonsai will send your 1099-K tax form by February 1st of the following year via physical mail, unless you have opted in to e-delivery.
If you believe you fit the criteria for receiving a 1099-K tax form but have not by the end of February, please notify our team.
Interested in learning more? You can also use Bonsai to calculate your self-employment tax deductions or use our free self-employment tax calculator.