Glossary

Form 1099-NEC

Form 1099-NEC reports nonemployee compensation of 600 dollars or more paid to independent contractors, and the income is subject to both income tax and self-employment tax.

How it works

Businesses report payments of 600 dollars or more to independent contractors on Form 1099-NEC, due to the contractor and the IRS by January 31. The income is subject to income tax and self-employment tax and is reported on Schedule C. Payments made in crypto are reported at fair market value on the payment date.

Why it matters

Contractors owe estimated taxes during the year, and a business that pays workers on 1099-NEC who function as employees faces payroll tax exposure and the trust fund recovery penalty.

Related: worker classification, estimated taxes. Read more: Form 1099-NEC guide.

Guides that cover form 1099-NEC

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Definitions are general information, not legal advice, and may not reflect the most recent changes in law.

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