Form 1099-NEC: Nonemployee Compensation

The Form 1099-NEC, officially titled "Nonemployee Compensation," is an IRS document used to report payments made to independent contractors and freelancers. It serves as a record of income earned outside of traditional employment for tax purposes.

Who Receives a 1099-NEC?

A. Independent Contractors and Freelancers: Anyone who provides services to a business but is not considered an employee receives a 1099-NEC if they earned $600 or more from that business in a tax year. This includes professions like writers, graphic designers, consultants, and rideshare drivers.

B. Non-Incorporated Businesses: If you run a sole proprietorship or a partnership and received non-employee compensation of $600 or more from another business, you can expect a 1099-NEC.

Who Issues a 1099-NEC?

Businesses are responsible for issuing Form 1099-NEC to independent contractors and freelancers they paid $600 or more during the tax year. This applies even if federal income taxes were withheld from the payments.

What Information Does a 1099-NEC Include?

The Form 1099-NEC contains essential information for both the payer (business) and the recipient (independent contractor/freelancer). Here's a breakdown of key details:

  • Payer Information: Business name, address, and phone number.
  • Recipient Information: Your name, Social Security number (SSN) or Taxpayer Identification Number (TIN).
  • Nonemployee Compensation: Total amount of income paid to the recipient during the tax year.
  • State Income Tax Withholding: If applicable, the amount of state income tax withheld from the payments.

When are 1099-NECs Due?

A. For Payers: The deadline to file Form 1099-NEC with the IRS is January 31st of the following year. A copy of the form must also be sent to the recipient by the same deadline.

B. For Recipients: You don't need to file the 1099-NEC with the IRS, but you'll use the information reported on the form to report your income on your tax return.

What if You Don't Receive a 1099-NEC?

Even if you don't receive a 1099-NEC, you're still responsible for reporting all your income on your tax return. You can track your income records and report the earnings from your independent contractor work.

How to Use a 1099-NEC?

The information on your 1099-NEC is crucial for filing your tax return. You'll need to report the income mentioned on the form on your Schedule C (Profit or Loss from Business) or Schedule SE (Self-Employment Tax).