Form 1099-NEC is used to report nonemployee compensation.
Payers must provide a copy of 1099-NEC to the independent contractor by January 31 of the year following payment.
What is Nonemployee Compensation?
Payments reported as nonemployee compensation (NEC) have four characteristics:
- The payments made during the year totaled $600 or more.
- The payee was not an employee of the payer.
- Payment was made in the course of a trade or business, including nonprofits and government agencies.
- Payment was made to an individual, a partnership, or an estate; or, payment was made to a corporation if the payment was for fish purchases or attorney fees.
Form 1099-NEC Box 1 is used to report $600 or more paid in the course of business for:
- Services, including parts and materials, performed as an independent contractor.
- Oil and gas payments for a working interest, irrespective of whether services were performed or not.
- Purchases of fish or other aquatic life from a person engaged in the business of fishing.
- Attorney fees paid to an attorney. (Note: gross proceeds paid to an attorney continue to be reported in Box 10 of Form 1099-MISC.)
- Nonqualified deferred compensation includible in gross income because the NQDC plan doesn't satisfy the requirements of section 409A.
Form 1099-NEC Box 4 is used to report backup withholding, irrespective of the amount in Box 1.
The amount in Box 1 is generally treated as self-employment income and reported on Schedule C or Schedule F. It is also possible, however, for a taxpayer who's not self-employed to receive a 1099-NEC, i.e., the activity that gave rise to the payment is sporadic and/or more akin to a hobby, unrelated to a section 162 trade or business. In such a case the payment should not be entered in the 1099-NEC menu in their tax return but simply be reported as Other Income.
Reporting 1099-NEC as self-employment income
To enter Form 1099-NEC in TaxSlayer ProWeb, from the Federal Section of the return select:
- Income
- 1099-NEC - Enter the information on the form, then click Continue.
After entering the 1099-NEC information, you will be prompted to report the income on Schedule C or Schedule F:
Select the appropriate schedule and click Continue. If the schedule is already included in the return, you will be prompted to link the 1099-NEC to that schedule or create a new one.
What if the Recipient's TIN is an EIN?
If the taxpayer's Form 1099-NEC has their business's EIN as the Recipient's TIN, you'll still enter it in the tax return with their SSN. Be sure to have the business's EIN entered in the appropriate menu so the IRS can link the 1099-NEC with the return. The copy of Form 1099-NEC that prints with the tax return will show the taxpayer's SSN as the Recipient's TIN, but this is not a problem as the e-file data does not include this form.
Note: This is an article on entering a 1099-NEC in TaxSlayer ProWeb. It is not intended as tax advice.
Additional Information