The 1099-NEC is an official tax form used in the United States to report non-employee compensation paid to individuals who are not employees, including freelancers, independent contractors, and self-employed individuals. It is used to report payments of $600 or more that were made for services rendered in the course of a trade or business.
Prior to tax year 2020, non-employee compensation was reported on Form 1099-MISC, but starting in tax year 2020, it is reported on Form 1099-NEC. The 1099-NEC is important to freelancers because it is used to report their income to the Internal Revenue Service (IRS), and freelancers are responsible for paying taxes on the income reported on the form.
When a client pays a freelancer more than $600 in a tax year, they are required by the IRS to provide the freelancer with a copy of their 1099-NEC form by January 31 of the following year. The freelancer will need this form to accurately report their income on their tax return, as well as to keep track of their earnings and expenses throughout the year.
It’s important for freelancers to keep accurate records of all their income and expenses, including any 1099-NEC forms they receive, in order to file their taxes accurately and minimize the risk of being audited by the IRS.
See also: 1099-MISC Form