# Taxes on AI Training Income (US): 1099s and Quarterly Tax

> Taxes on AI training income in the US: why no tax is withheld, the 15.3% self-employment tax, 1099-NEC and 1099-K rules and quarterly due dates.

Canonical: https://origindatapartners.com/guides/ai-training-jobs-taxes
By: Origin Data Partners
Status: Published
Published: 2026-11-14
Updated: 2026-11-14
Sources checked: 2026-11-14

## Quick answer

Yes, you pay taxes on AI training income. Programs such as DataAnnotation, Outlier, Handshake AI, Prolific and Mercor treat you as an independent contractor, so in most cases no tax is taken out of your pay. In the US you report the income on Schedule C, owe 15.3% self-employment tax once net earnings reach $400, and may need to pay estimated tax four times a year. The IRS says you must report the income even if no 1099 arrives. This is general information, not tax advice.

## Key points

- AI training work is almost always contract work. The programs' own pages say you are an independent contractor, not an employee.
- The IRS self-employment tax rate is 15.3%, and you file Schedule SE once net self-employment earnings reach $400.
- For tax years beginning after 2025, the IRS threshold for a 1099-NEC is $2,000. Payment apps send a 1099-K over $20,000 in more than 200 transactions.
- You must report all of the income even without a form. Keep your own log of payments and expenses.
- Estimated tax is generally due April 15, June 15, Sept. 15 and Jan. 15 if you expect to owe $1,000 or more.

## Do you pay taxes on AI training income?

Yes. Taxes on AI training income work like taxes on any freelance work in the US: the money is taxable, and because you are a contractor, the program usually does not withhold tax for you. You pay income tax and self-employment tax yourself, through your return and, if you expect to owe enough, through quarterly estimated payments.

The IRS is direct about side income from apps and websites: "You must report income earned from the gig economy on a tax return, even if the income is: From part-time, temporary or side work Not reported on an information return form - like a Form 1099-K, 1099-MISC, 1099-NEC, W-2 or other income statement" ([IRS](https://www.irs.gov/businesses/gig-economy-tax-center)). On payments to contractors it says: "Generally, you do not have to withhold or pay any taxes on payments to independent contractors" ([IRS](https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee)). That is why the tax lands on you.

This page is general information about US federal tax, read from IRS.gov on 14 November 2026. It is not tax advice. Your state may tax the income too, and your own situation can change the answer, so ask a tax professional before you file. Other countries treat this income differently; if you live outside the US, check your own tax authority.


## What AI training programs say about taxes and tax forms

Each program below describes how it pays and how it treats your taxes on its own pages, read on 14 November 2026. Where a page does not say, the table says not published.

| Program | How it pays | What its own pages say about tax forms or contractor status |
| --- | --- | --- |
| DataAnnotation | PayPal | Contractor terms: you work "solely as an independent contractor" and provide a W-9 or W-8 on request. Whether it sends a 1099: not published in its FAQ. |
| Outlier | Weekly, by PayPal, Airtm or ACH | Independent contractor, not an employee. Listings say "This is a 1099 contract opportunity". |
| Handshake AI | Stripe | Contractor model, not employment. You fill out a W-8 or W-9 and are "responsible for taxes on your own income". |
| Mercor | Weekly (Wednesdays), by Stripe or Wise | Contract roles with a 1099-NEC; no W-2 positions; taxes are not deducted. Non-US experts file a W-8BEN and get no 1099. |
| Prolific | PayPal | Participants are independent contractors. You keep your own income records; a list of submissions and rewards can be downloaded. |
| Turing | Not published on the page read | Independent contractor; you manage your tax obligations under local law. Turing recommends a tax professional. |

Sources: DataAnnotation pays by PayPal ("We send payments via PayPal", [DataAnnotation FAQ](https://www.dataannotation.tech/faq)) and its terms say "Upon request, you will provide Company with an executed IRS Form W-9 or W-8" ([DataAnnotation terms](https://app.dataannotation.tech/contract/41)). Outlier: "You'll work as an independent contractor/freelancer, not as an employee of Outlier" ([Outlier FAQ](https://outlier.ai/faq)) and "This is a 1099 contract opportunity on the Outlier.ai platform" ([Outlier](https://outlier.ai/generalists/en-us)). Handshake: "Handshake AI operates under a contractor model and not an employer-employee relationship" ([Handshake AI](https://ai-support.joinhandshake.com/articles/32245223383703)). Mercor: "Mercor does not offer W2 positions" ([Mercor](https://talent.docs.mercor.com/policies/us-1099-vs-w2)) and "Mercor does not deduct taxes from your payments" ([Mercor](https://talent.docs.mercor.com/policies/taxes-work-authorization)). Prolific: "participants are not employees of Prolific - they are independent contractors" ([Prolific](https://participant-help.prolific.com/en/articles/445071-how-much-have-i-earned-from-prolific-and-do-i-have-to-pay-tax)). Turing: "As an independent contractor, you'll be responsible for managing your tax obligations in accordance with local laws" ([Turing](https://www.turing.com/jobs)).


## Self-employment tax: 15.3% once you net $400

Self-employment tax is Social Security and Medicare tax for people who work for themselves. The IRS says "The self-employment tax rate is 15.3%" and that "The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare". You must pay it and file Schedule SE if "Your net earnings from self-employment (excluding church employee income) were $400 or more" ([IRS](https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes)).

There is a ceiling on the Social Security part. The IRS says "For 2026, the first $184,500 of your combined wages, tips, and net earnings is subject to any combination of the social security part of self-employment tax" ([IRS](https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes)).

The tax is figured on net earnings from self-employment, which Schedule C works out from what you were paid and your business expenses. Which of your costs count as expenses is a question for a tax professional.


## Where the income goes on your return: Schedule C and Schedule SE

Two schedules do the work. The IRS says "If you are self-employed as a sole proprietor or independent contractor, you generally use Schedule C to figure net earnings from self-employment," and "If you have earnings subject to self-employment tax, use Schedule SE to figure your net earnings from self-employment" ([IRS](https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes)).

In practice: total what every program paid you during the year, list it on Schedule C with any expenses you are allowed to claim, and carry the net figure to Schedule SE and your Form 1040. If you work for more than one program, all of it goes in, whether or not each one sends a form.


## 1099-NEC and 1099-K: which form you may get

A 1099-NEC is the form a business files for payments to a contractor. The IRS instructions say "For tax years beginning after 2025, the minimum threshold amount for reporting certain payments required to be reported on certain information returns and/or perform backup withholding on those payments increased to $2,000," and payers enter "nonemployee compensation (NEC) of $2,000 or more" ([IRS](https://www.irs.gov/instructions/i1099mec)).

Mercor's tax page, read on 14 November 2026, says "If you submitted a W9 and earned over $600 during the year, you will receive a 1099-NEC form by February through Stripe" ([Mercor](https://talent.docs.mercor.com/policies/taxes-work-authorization)). $600 was the IRS threshold for payments made in 2025: the IRS says "For payments made before 2026, the reporting threshold is $600. For payments made in 2026, the reporting threshold is $2,000." ([IRS](https://www.irs.gov/businesses/small-businesses-self-employed/am-i-required-to-file-a-form-1099-or-other-information-return)). A payer may still send a form for less. Treat the program's page as a description of what it sends, not as the rule for what you owe.

A 1099-K comes from payment apps and marketplaces. The IRS says "A payment app or online marketplace is required to send you a Form 1099-K if the payments you received for goods or services total over $20,000 in more than 200 transactions," and "You may receive a Form 1099-K even when total payments or transactions are less than the reporting threshold" ([IRS](https://www.irs.gov/businesses/understanding-your-form-1099-k)).

Neither form decides whether you owe tax. The IRS: "Whether or not you receive a Form 1099-K, you must still report any income on your tax return" ([IRS](https://www.irs.gov/businesses/understanding-your-form-1099-k)). If one payment shows up on two forms, ask a tax professional how to report it once.


## Quarterly estimated taxes and due dates

With no withholding, the IRS expects you to pay during the year. It says people "generally have to make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed," and that "Individuals, including sole proprietors, partners, and S corporation shareholders, generally use Form 1040-ES, to figure estimated tax" ([IRS](https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes)). Skipping payments has a cost: "you may be charged a penalty even if you are due a refund when you file your income tax return."

The IRS lists four payment periods ([IRS](https://www.irs.gov/faqs/estimated-tax/individuals/individuals-2)):

| Income earned | Payment due |
| --- | --- |
| Jan. 1 to March 31 | April 15 |
| April 1 to May 31 | June 15 |
| June 1 to Aug. 31 | Sept. 15 |
| Sept. 1 to Dec. 31 | Jan. 15 of the following year |

The IRS adds: "If the due date for an estimated tax payment falls on a Saturday, Sunday, or legal holiday, the payment will be on time if you make it on the next day that isn't a Saturday, Sunday or holiday" ([IRS](https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes)). If AI training is your only self-employment income and it is small, you may owe less than $1,000; a tax professional can tell you whether payments are needed.


## Keep your own records

Programs pay through different channels, and some do not send any form, so your own log matters most. The IRS says "You may choose any recordkeeping system suited to your business that clearly shows your income and expenses" and "You must keep your records as long as needed to prove the income or deductions on a tax return" ([IRS](https://www.irs.gov/businesses/small-businesses-self-employed/recordkeeping)).

Some programs help. Prolific says "Participants are able to download a full list of submissions completed and the Reward earned for each if they require it for any tax return," and also that "You would need to collate your own records of income via the site, and you are responsible for considering whether you need to report it to your tax office, according to the tax rules in your own country" ([Prolific](https://participant-help.prolific.com/en/articles/445071-how-much-have-i-earned-from-prolific-and-do-i-have-to-pay-tax)).

- Log each payment: date, program, amount and the account it landed in (PayPal, Stripe, Wise or bank).
- Save the program's pay statements or dashboard exports at year end, before you lose account access.
- Keep receipts for anything you plan to claim as a business expense, and ask a professional which ones qualify.
- Note the tax forms you submitted to each program (W-9 or W-8) and the forms you received.


## Next step: find work that fits your field

Taxes are one part of the decision. Before you join a program, check it: our trust checks of [DataAnnotation](https://origindatapartners.com/guides/is-dataannotation-legit), [Outlier](https://origindatapartners.com/guides/is-outlier-ai-legit), [Mercor](https://origindatapartners.com/guides/is-mercor-legit), [Handshake AI](https://origindatapartners.com/guides/is-handshake-ai-legit) and [Prolific](https://origindatapartners.com/guides/is-prolific-legit) cover pay and payout rules, and [are AI training jobs legit?](https://origindatapartners.com/guides/are-ai-training-jobs-legit) covers scams. For published pay by field, see [AI evaluation jobs](https://origindatapartners.com/guides/ai-evaluation-jobs) and [remote data annotation jobs](https://origindatapartners.com/guides/data-annotation-jobs-remote), or browse [paid AI training programs for experts](https://origindatapartners.com/experts).

[Tell us what you do](https://origindatapartners.com/experts#inquiry). We'll send you the paid AI work that fits your field, wherever you live. It's free.

Origin Data Partners is independent of the programs on this page. A program may pay Origin when Origin introduces someone who joins it, which never changes what you are paid ([how Origin is paid](https://origindatapartners.com/referral-disclosure)).


## Questions and answers

### Do you have to pay taxes on DataAnnotation?

Yes, if you live in the US. DataAnnotation's terms describe you as an independent contractor responsible for income and self-employment taxes, and the IRS says side income must be reported even without a 1099. Self-employment tax is 15.3% once net earnings reach $400. This is general information; ask a tax professional about your case.

### Does DataAnnotation send a 1099?

Its FAQ does not say, as read on 14 November 2026. Its contractor terms say you provide a W-9 or W-8 on request, and it pays through PayPal. Either way the IRS says you report all of the income, form or no form.

### Do you have to pay taxes on tutoring income?

Yes. The IRS says income from part-time, temporary or side work must be reported even when no 1099 or W-2 is issued. If you tutor, or work as an AI tutor, as a contractor, it goes on Schedule C, and self-employment tax applies once net earnings reach $400.

### How do I pay taxes on 1099 income?

Report it on Schedule C, figure self-employment tax on Schedule SE, and carry both to Form 1040. If you expect to owe $1,000 or more for the year, the IRS says to make estimated payments with Form 1040-ES by April 15, June 15, Sept. 15 and Jan. 15.

### Does Mercor send a 1099?

Mercor says it offers contract roles with a 1099-NEC for US experts who complete a W-9, sent through Stripe by February. Its page states a $600 trigger, the IRS threshold for payments made in 2025; for 2026 payments the IRS threshold is $2,000. Non-US experts file a W-8BEN and get no 1099.

### Does Outlier send a 1099?

Outlier calls its listings "a 1099 contract opportunity" and says you work as an independent contractor, not an employee. It tells contributors to contact a tax advisor with questions about their own circumstances.

## Sources

- [IRS: Gig economy tax center](https://www.irs.gov/businesses/gig-economy-tax-center)
- [IRS: Independent contractor (self-employed) or employee?](https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee)
- [IRS: Self-employment tax (Social Security and Medicare taxes)](https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes)
- [IRS: Estimated taxes](https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes)
- [IRS: Estimated tax FAQ (payment due dates)](https://www.irs.gov/faqs/estimated-tax/individuals/individuals-2)
- [IRS: Instructions for Forms 1099-MISC and 1099-NEC](https://www.irs.gov/instructions/i1099mec)
- [IRS: Am I required to file a Form 1099 or other information return?](https://www.irs.gov/businesses/small-businesses-self-employed/am-i-required-to-file-a-form-1099-or-other-information-return)
- [IRS: Understanding your Form 1099-K](https://www.irs.gov/businesses/understanding-your-form-1099-k)
- [IRS: Recordkeeping](https://www.irs.gov/businesses/small-businesses-self-employed/recordkeeping)
- [DataAnnotation: FAQ](https://www.dataannotation.tech/faq)
- [DataAnnotation: contractor terms](https://app.dataannotation.tech/contract/41)
- [Outlier: FAQ](https://outlier.ai/faq)
- [Outlier: AI Evaluator (English, US) opportunity](https://outlier.ai/generalists/en-us)
- [Handshake AI Help Center: payments processing](https://support.joinhandshake.com/hc/en-us/articles/32263614087575-Handshake-AI-payments-processing)
- [Handshake AI Help Center: work authorization and contractor model](https://ai-support.joinhandshake.com/articles/32245223383703)
- [Mercor docs: US 1099 vs. W-2 work](https://talent.docs.mercor.com/policies/us-1099-vs-w2)
- [Mercor docs: taxes and work authorization](https://talent.docs.mercor.com/policies/taxes-work-authorization)
- [Mercor docs: payments](https://talent.docs.mercor.com/how-to/payments)
- [Prolific Participant Help: do I have to pay tax?](https://participant-help.prolific.com/en/articles/445071-how-much-have-i-earned-from-prolific-and-do-i-have-to-pay-tax)
- [Turing: jobs FAQ (taxes)](https://www.turing.com/jobs)

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