As a small business owner, you’re probably familiar with the 1099 series of tax forms. If you’ve hired any independent contractors during the previous year, you’ll need to issue them Form 1099 Misc to report their earnings to the IRS. But what about workers who are non-employees? That’s where Form 1099 NEC Tax comes in.
Table of Contents
- What do I report on form 1099 Non-Employee Compensation?
- Here are some 1099 NEC examples of payments
- Are there any exceptions for filing a 1099 NEC Form?
- What should I do if I receive a Form 1099 Non-Employee Compensation?
This form is for workers who are treated as self-employed, but who don’t quite the IRS. New Form 1099 NEC, which is used to report payments made to independent contractors for services rendered. This form is in addition to Forms 1099-MISC and 1099-K, which are already used to report payments to independent contractors. The main difference between the new Form 1099-NEC and the other two forms is that the form is specifically used to report independent contractor payments made in a tax year. Read on to find out what to report and how to report the 1099 NEC Tax Return.
What do I report on form 1099 Non-Employee Compensation?
Form 1099 NEC is used to report the amount of nonemployee compensation paid to individuals. It is used to report payments for services performed by independent contractors. The form is also used to report payments for services performed by directors and officers of a corporation.
Here are some 1099 NEC examples of payments
Following are some of the example payments reported on the 1099 NEC Form:
- Among professional service fees are those paid to attorneys, accountants, architects, contractors, engineers, etc.
- Fees paid by one professional to another, such as referral fees
- Payment for parts or material used to perform the service if supplying the parts or materials was incidental to providing the service
- Compensation paid to independent contractors, including freelancers and gig workers
- Payment to nonemployees for entertainment services
Are there any exceptions for filing a 1099 NEC Form?
Here are some Form 1099 NEC exemptions:
- Form 1099 NEC doesn’t require reporting payments made to a corporation. For example, Rents paid to a real estate agent or a property management company.
- Payments made to independent contractors via credit card or PayPal do not have to be reported on Form 1099-NEC.
An Additional Note on Form 1099 NEC
A new revision to the 1099 NEC Form is accelerated & it requires direct sales to be reported on 1099 NEC Box 2. For more information about the 1099 NEC Form look here.
What should I do if I receive a Form 1099 Non-Employee Compensation?
If you received a Form 1099-NEC, it means that the payer made federal income tax withholding and/or backup withholding from nonemployee compensation payments made to you during the year. The payer is required to send you this form if the total amount of those payments was more than $600.
Nonemployee compensation is any payment for services you provide as an independent contractor. This includes payments for work done in business activities such as consulting, writing, or providing professional services. You should report the income shown on Form 1099-NEC on your tax return. You will need to use Form 1040 and Schedule C to report this income.
If you have contractors, you will need to file Form 1099-NEC. This article provides information on who needs to file this form, what information is required, and when the form needs to be filed. By understanding your reporting requirements, you can avoid costly penalties. For more details visit Form1099Online.