What is the 1099-NEC Form?
A 1099-NEC form is an Internal Revenue Service (IRS) form that is used by businesses to report payments made to independent contractors, such as a self-employed advocate, freelancers, sole proprietors, and self-employed persons.
Prior to 2020, businesses reported compensation to non-employees using the 1099-MISC form. The 1099-Nec form is a version of a variety of 1099 tax forms, which include the 1099-MISC form for miscellaneous income.
How Do You Fill Out the 1099-NEC Form?
Below are the suggested steps to complete the 1099-NEC form.
Payments made for services performed by a sole proprietor, such as fees paid to advocate for them, would go in box 1 of the 1099-Nec form. If the value of a consumer product sold by a business, on a buy-sell or commission-disposition, is worth $5000 or more to the recipient, enter ‘X’ in the box 2 checkbox.
Leave box 3 blank; it is available for use in later tax tax years. Box 4 is where federal income taxes withheld would go. Boxes 5-7 are information boxes used for income tax purposes.
Sole proprietors are required to report this information on the C or F schedules. Also, if the earnings reported on the 1099-NEC form are not self-employed income, then they would need to report this on line 8 as “Other Income” on Schedule 1.
