What a 1099-NEC is, in plain words
NEC stands for nonemployee compensation: pay for work you did as a freelancer, consultant or contractor, not as an employee.
Before 2020, this money was reported on a 1099-MISC. The IRS brought back the 1099-NEC so contractor pay would have its own form.
It goes on Schedule C as business income. What the work cost you comes off first. Then you pay income tax plus 15.3% self-employment tax on what's left.
W-2 or 1099? It depends how you were paid
W-2→
- You were
- An employee on payroll
- Taxes taken out
- Yes, from every paycheck
- Social Security and Medicare
- Split with your employer: you pay 7.65%
- At tax time
- Often a refund, or a small bill
1099-NECThis form
- You were
- A contractor or freelancer
- Taxes taken out
- Nothing
- Social Security and Medicare
- You pay both halves: 15.3%
- At tax time
- You owe it. Paying four times a year avoids a surprise
1099-K→
- You were
- Paid through an app or card processor
- Taxes taken out
- Nothing
- Social Security and Medicare
- You pay both halves: 15.3%
- At tax time
- Like a contractor. Your costs come off first
Form 1099-NEC
What every box means
Tap any box. The ones marked red end up on your tax return.
Form 1099-NEC Nonemployee Compensation
2025
Ends up on your return Private: keep it safe
Read all 8 boxes as a list
- Payer Payer's name, address
- The client or company that paid you. Keep a list of your clients. Each one that paid you $600 or more should send one.
- TIN Payer's and recipient's TIN
- Their tax ID and your Social Security number. The client got your number from the W-9 you filled out. Check that it's yours. Nothing on your return comes from it.
- Name Recipient's name
- You. On a joint return, it shows whose business this is. Each spouse with a business files their own Schedule C.
- Box 1 Nonemployee compensation
- What they paid you for your work during the year. It's business income. Your expenses come off it on Schedule C, and what's left is taxed twice: income tax and self-employment tax.Goes on: Schedule C, line 1
- Box 2 Direct sales checkbox
- A check means you bought $5,000 of products to resell. It doesn't add any money to your return.
- Box 3 Excess golden parachute
- A large payment when a company changes hands. Very rare.
- Box 4 Federal income tax withheld
- Usually blank. Filled only if you never gave the client a W-9 and they had to hold back 24%. If it's there, it counts as already paid.Goes on: Form 1040, line 25b
- Box 5-7 State tax, state ID, state income
- The state row, if the payer filled it. Goes on your state return.
Where it goes on your tax return
The boxes that become numbers on your return, and the line each one lands on. Tap one to see why.
Box 1Nonemployee compensationSchedule C, line 1
What they paid you for your work during the year. It's business income. Your expenses come off it on Schedule C, and what's left is taxed twice: income tax and self-employment tax.
How much to set asideBox 4Federal income tax withheldForm 1040, line 25b
Usually blank. Filled only if you never gave the client a W-9 and they had to hold back 24%. If it's there, it counts as already paid.
What do I do with it?
Do I have to do anything with it?
Yes. It goes on Schedule C as business income. Then you subtract what the work cost you (mileage, supplies, phone), and pay tax on the rest.
Why did nothing come out for taxes?
Clients don't withhold from contractors. You pay income tax and 15.3% self-employment tax yourself, ideally four times a year so April isn't a shock.
It's wrong
Ask the client for a corrected 1099-NEC. Report what you actually received, and keep the proof (bank deposits, invoices).
I never got one
You owe tax on the income anyway, even under $600. Report what you were paid from your own records. The form is the client's job, not a condition of reporting.
Lost it, or it never came?
You don't need the form to report the money, but you can usually still get it.
Never got your 1099? What to do- 1Ask the client. Many send 1099-NECs through a portal like Tax1099, Track1099 or their payroll company.
- 2Apps that paid you as a contractor post it in the app's tax section.
- 3Past years: your IRS Wage & Income transcript lists every 1099-NEC filed under your name.
Free tool
Need the numbers off your 1099-NEC in a spreadsheet?
Drop the PDF or a photo. Every box comes back as an Excel column. No account, and we keep nothing.
Questions people ask
What is the difference between a 1099-NEC and a W-2?
A W-2 is for employees: taxes came out of every check. A 1099-NEC is for contractors: nothing came out, and you pay the tax yourself, including self-employment tax.
Do I pay tax on a 1099-NEC under $600?
Yes. $600 is when the client has to send the form. All of what you earned is income, with or without a form.
Can I lower what I owe on it?
Yes. Business costs come off before tax: mileage, supplies, tools, part of your phone. Keep the records.
What is the difference between a 1099-NEC and a 1099-K?
A 1099-NEC comes from a client who paid you directly. A 1099-K comes from a card processor or app that moved the money. Don't count the same payment twice.
Related forms
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