Takeaways
- Use Form 1099-NEC to accurately report your taxable income to the IRS.
- Businesses must report payments of $600 or more in non-employee comp.
- You should receive your 1099-NEC by January 31st to help you file your taxes.
- Starting in 2026, the $600 reporting requirement increases to $2,000.
- Nonemployee compensation can include consulting payments, commissions, prizes, and even awards.
What Is Form 1099-NEC?
Form 1099-NEC reports nonemployee compensation to the Internal Revenue Service (IRS). Businesses must file it when they pay $600 or more in a calendar year to someone who isn’t an employee, which includes freelancers, independent contractors, and other self-employed workers.
Freelance work has gone mainstream. According to the Upwork Research Institute’s 2023 Freelance Forward survey, 38% of the U.S. workforce, or about 64 million Americans, did freelance work that year.[1] As this workforce continues to grow, understanding Form 1099-NEC is more important than ever.
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How Form 1099-NEC Works
Businesses that hire independent contractors must file Form 1099-NEC if they pay $600 or more in a year for services performed. However, these payments must meet all of the following criteria:
- The recipient is not an employee.
- Payment was for services in the course of business.
- The total paid in the year was at least $600.
- The recipient is an individual, partnership, estate, or, in some cases, a corporation.
- Form 1099-NEC includes the payer's and recipient's names, addresses, Taxpayer Identification Numbers (TINs), and the total amount paid.
It is important to note that this form does not withhold any taxes. As a contractor, you are responsible for calculating and paying federal, state, and self-employment taxes. The IRS reintroduced Form 1099-NEC in 2020 to replace Box 7 of Form 1099-MISC. This change helps separate traditional business payments from contractor income, making tax reporting clearer.
Smart Tip:
Starting in tax year 2026, the IRS is increasing the current $600 reporting threshold to $2,000 and will adjust it for inflation.[2]
Who Gets a Form 1099-NEC?
Not everyone will get Form 1099-NEC. You will receive this form if you are:
- A freelancer or independent contractor
- A gig worker (such as a rideshare or delivery driver)
- A self-employed professional (such as a designer, writer, or consultant)
The company that hired you must send a 1099-NEC if you earned $600 or more. Don’t be surprised to get more than one form if you worked for multiple companies; each company must send you a form.
Even if you did not receive a Form 1099-NEC, you are still responsible for reporting those payments as taxable income on your taxes. So, it is critical to maintain personal records and not solely rely on businesses to report your income.
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Who Should Not Get a Form 1099-NEC?
You should not receive a 1099-NEC if:
- You were paid as an employee. In that case, you will receive a Form W-2.
- You were paid through a third-party platform like PayPal or Venmo. Those payments are usually reported on Form 1099-K.
- The total payment was less than $600, unless there was backup withholding.
Corporations generally do not receive 1099-NEC forms. However, there may be some exceptions for certain service providers.
Form 1099-NEC Quiz
If you are unsure, the IRS recommends these common-sense questions to determine who is a contractor and who is an employee[3]:
- Does the company control, or have the right to control, what the worker does and how the worker performs their job?
- Does the payer control the business aspects of the worker’s job? (things like how the worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
- Are there written contracts or employee-type benefits (that is, pension plan, insurance, vacation pay, etc.)?
- Will the relationship continue, and is the work performed a key aspect of the business?
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How to Use a Form 1099-NEC
If you receive a 1099-NEC, you must include the income on your tax return. Most people report it on Schedule C as business income. You may also need to file Schedule SE to calculate self-employment tax.
It is essential to keep records of your income and expenses. Unlike W-2 income, no taxes are withheld from 1099-NEC payments. You may need to make estimated tax payments during the year to avoid penalties.
When Will You Receive Form 1099-NEC?
Businesses must send you Form 1099-NEC by January 31 of the following year. For example, if you did $10,000 of work for a company throughout 2025, you should receive your Form 1099-NEC by January 31, 2026.
They must also file the form with the IRS by the same date, whether filing electronically or on paper. If a business fails to file on time, it may face penalties. The IRS may waive penalties under certain circumstances.[4]
When Is Form 1099-NEC Due?
The deadlines for Form 1099-NEC are as follows:
- Recipient Copy: Must be mailed or delivered by January 31
- IRS Copy: Must be filed by January 31 (electronic or paper)
Smart Tip:
Businesses should plan to collect W-9 forms and track payments throughout the year to avoid scrambling at the last minute.
Smart Summary
Form 1099-NEC is used to report nonemployee compensation of $600 or more. If you hire independent contractors or freelancers, you must file this form. If you receive it, you must report the income on your tax return and pay any necessary self-employment taxes. This form plays a key role in the gig economy and in tracking self-employed income. Filing and reporting it accurately is essential to staying compliant with tax laws.
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(1) Upwork. Freelance Forward 2023. Last Accessed January 24, 2026.
(2) Internal Revenue Service. Publication 1099 General Instruction for Certain Information Returns. Last Accessed January 24, 2026.
(3) Internal Revenue Service. Independent contractor (self-employed) or employee? Last Accessed January 24, 2026.
(4) Internal Revenue Service. Penalty Relief. Last Accessed January 24, 2026.
