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Form 1099-NEC stands for Nonemployee Compensation. Businesses send it to freelancers, independent contractors, and other self-employed workers who received $600 or more during the year. If you received one, it means you earned income that wasn't subject to payroll tax withholding, and you're responsible for reporting it — and paying taxes on it — yourself.
What Goes on the 1099-NEC
Box 1 is the main number: it shows the total amount the business paid you during the year. This amount gets reported on Schedule C of your federal return as self-employment income. From there, you'll calculate your net profit (income minus deductible business expenses) and pay income tax plus self-employment tax on what's left.
Why Self-Employment Tax Is Different
When you're an employee, your employer pays half of Social Security and Medicare taxes on your behalf. When you're self-employed, you pay both halves yourself — currently 15.3% on net self-employment income up to a threshold, then 2.9% above it. The good news is you can deduct half of that self-employment tax on your return.
Multiple 1099-NECs
If you did work for several clients during the year, you may receive multiple 1099-NECs. You add all of it together on Schedule C. You also need to report income you earned even if you didn't receive a 1099-NEC for it — the IRS expects you to report all self-employment income, not just what's documented on forms.
When You Should Receive It
Businesses are required to send 1099-NECs by January 31. If a client paid you less than $600, they're not required to send a form, but you still owe tax on that income.
Quarterly Estimated Taxes
Because no one withholds taxes from 1099-NEC income, you're generally expected to pay estimated taxes quarterly throughout the year. If you don't, you may owe an underpayment penalty when you file.
Keeping good records of your business income and expenses all year makes dealing with 1099-NECs much easier. If your self-employment income is significant, working with a tax professional can help you minimize what you owe legally.