Form 1099-NEC – Nonemployee Compensation is filled out for reporting payments made to nonemployees. If you hired freelancers or independent contractors to do work for you, file Form 1099-NEC to report this income.
Although Form 1099-MISC can be used for this, you can also use 1099-NEC. While 1099-MISC is also used for reporting rents, awards, prizes, etc. Form 1099-NEC is solely used to report nonemployee compensation.
How to fill out Form 1099-NEC?
Form 1099-NEC is a simple tax form that you can use to report income paid to nonemployees. When filling out Form 1099-NEC, you will report the following.
- Nonemployee Compensation
- Whether or not the payer made direct sales totaling $5,000 or more of consumer products for resale
- Federal Income Tax Withheld
- State Income Tax Withheld
- State / Payer’s State Number
- State Income
For the 2021 tax year, Form 1099-NEC is out. Fill out 1099 NEC to report the payments made to a nonemployee during the 2021 tax year. This tax form will be used by the recipient when filing a federal income tax return in the 2022 tax season.
Should I fill out Form 1099-NEC or 1099-MISC?
The answer to this question largely depends on whether or not you file Forms 1099-MISC. If so, use Form 1099-NEC to see how much you’ve paid freelancers and independent contractors. If you don’t file Forms 1099-MISC that much (maybe a couple of copies), the nonemployee compensation can blend in with Forms 1099-MISC.