What is 1099 NEC Form?
The 1099 NEC form is an IRS tax document businesses use to report nonemployee compensation—that means payments of $600 or more made to freelancers, independent contractors, and other self-employed workers.
In simple terms, if you worked for a company but weren’t on payroll, you’ll likely receive a 1099 NEC instead of a W-2.
Fun fact: Before 2020, these payments were reported on the 1099 MISC form. The IRS reintroduced the NEC to make tax reporting clearer and less confusing.
Who Gets a 1099 NEC?
You’ll usually get a 1099 NEC if you’re:
- An independent contractor (consultants, writers, designers, developers, etc.)
- A freelancer or gig worker (rideshare drivers, delivery workers, etc.)
- A self-employed professional (lawyers, accountants, tradespeople)
- Anyone who provides services to a business without being an employee
What’s Reported on the 1099 NEC?
Businesses use this form to report:
- Nonemployee compensation (services, contract work, commissions)
- Professional service fees
- Prizes or awards related to work performed
Deadlines You Should Know
- January 31 → Businesses must send the form to contractors
- January 31 → Businesses must also file it with the IRS
Missing the deadline can mean penalties for businesses, so most take it seriously.
NOTE:
Employee compensation is earned income and is reported to the IRS on Form W-2.
1099 NEC vs. 1099 MISC
People often confuse the two. Here’s the quick difference:
| 1099 NEC | 1099 MISC |
| Reports nonemployee compensation (contractors, freelancers) | Reports miscellaneous income (rent, royalties, prizes, etc.) |
| Introduced in 2020 | Used before 2020 for contractor payments |
| Filing deadline: January 31 | Deadlines vary |
Learn more about the 1099 MISC form here.
Example Scenario
- A small business hires a freelance web designer and pays them $2,000. That business must issue a 1099 NEC.
- The same business pays $1,200 in office rent. That gets reported on a 1099 MISC, not the NEC.
Key Takeaways
- The 1099 NEC form is for nonemployee compensation of $600 or more.
- Freelancers, contractors, and gig workers usually receive it.
- It replaced the old 1099 MISC reporting method in 2020.
- The deadline to file and distribute is January 31.
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FAQs – What is 1099 NEC Form
Q1. What is the 1099 NEC Form?
The 1099 NEC Form is an IRS tax document used to report payments of $600 or more made to non-employees, such as freelancers, independent contractors, and self-employed workers.
Q2. Who receives a 1099 NEC?
Independent contractors, freelancers, gig workers, and any self-employed professional who provides services to a business without being an employee.
Q3. What types of payments are reported?
Non-employee compensation, including service fees, contract work, commissions, and prizes or awards related to work performed.
Q4. Do I need a 1099 NEC for payments under $600?
No, the form is only required if payments total $600 or more per recipient.
Q5. What if a mistake is made on the form?
A corrected 1099 NEC can be submitted to both the IRS and the recipient.
Q6. Are corporations reported on 1099 NEC?
Typically no, except for certain payments such as legal services.
Q7. What happens if a business misses the deadline?
Penalties apply for late or incorrect filings, starting at $50 per form and increasing depending on the delay.
Q8. Why was the 1099 NEC reintroduced in 2020?
To separate nonemployee compensation from other miscellaneous payments, making tax reporting clearer and less confusing.
