Form 1099-NEC: What Is It and What Do You Do With It?

Form 1099-NEC reports income that companies pay to their independent contractors. Here’s more about the form and what you need to do with it.

What is Form 1099-NEC for?

The NEC in Form 1099-NEC stands for Non-Employee Compensation. That’s income earned by sole proprietors, freelancers, independent contractors, and other self-employed people.

Form 1099-NEC is used for income that used to be reported in Box 7 of Form 1099-MISC.

Who has to issue Form 1099-NEC?

The rules for Form 1099-NEC are the same as they were for Form 1099-MISC with non-employee compensation in Box 7. It’s just a minor paperwork change.

Generally, a company needs to issue a Form 1099-NEC if it paid an independent contractor $600 or more during the year and the payment is not reportable on a Form 1099-K. See the instructions for exceptions.

What do you do if you get a Form 1099-NEC?

File your taxes as you would have when you received a 1099-MISC. That will generally mean completing a Schedule C. You can learn more about how to file taxes for different independent contractor jobs in these tax guides.

Why did the IRS add Form 1099-NEC?

Form 1099-NEC actually used to be a standalone form prior to 1983. That’s when non-employee compensation moved to Form 1099-MISC.

One of the biggest problems with having non-employee compensation on Form 1099-MISC is that it meant different deadlines for Form 1099-MISC depending on what was reported on it. A Form 1099-MISC with non-employee compensation in Box 7 is due to the IRS and contractor on January 31st. Other Form 1099-MISCs are due on March 31st.

In addition to creating confusion, it also caused technical problems at the IRS trying to track whether forms were on time when payers bundled different types of Form 1099-MISC together.

Conclusion

If you received Form 1099-NEC, you probably need to file taxes as an independent contractor. Start your tax return now or ask a tax expert if you have any questions.