Form 1099-NEC is used to report non-employee compensation, which includes payments you receive for your work as an independent contractor. Not sure how to file 1099-NEC? We've got you covered. Check out this guide to learn more about Form 1099-NEC, who receives one, and how to file your taxes if you received a 1099-NEC.
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A 1099-NEC form reports nonemployee compensation, typically sent to self-employed individuals or independent contractors who worked during the previous year.
In most circumstances, businesses that you work for are required to issue Form 1099-NEC when they pay you $600 (2024 and 2025) or more in any year. This threshold will increase to $2,000 for 2026 and is adjusted for inflation thereafter.
If you receive payments through online payment services such as PayPal, you might also receive form 1099-K.
As a self-employed person, you're required to report all of your self-employment income regardless of whether you receive a Form 1099-NEC.
Form 1099-NEC reports nonemployee compensation, typically for self-employed individuals or independent contractors. If you receive a 1099-NEC, you report that income on Schedule C and pay any applicable self-employment taxes and income tax.
Form 1099-K reports payments received through third-party processors like Venmo or PayPal. Even if you don’t receive a 1099-K, you are required to report all income from these sources.
The IRS has updated 1099-K reporting requirements over recent years:
The IRS has been gradually phasing in new 1099-K reporting requirements for payments from third-party processors like Venmo and Paypal. In 2021, Congress changed the reporting threshold from more than $20,000 in payments and more than 200 transactions to over $600 in payments regardless of the number of transactions. But instead of using the new $600 threshold right away, the IRS applied the previous reporting threshold for the 2022 and 2023 tax years. For the 2024 tax year, the IRS is using a $5,000 threshold, regardless of the number of transactions. The One Big Beautiful Bill passed by Congress in July of 2025, changes the threshold back to more than $20,000 in payments and more than 200 transactions for the 2025 tax year and retroactively for tax years beginning with 2022.
Examples of people who might receive a 1099-NEC form include:
If you’ve paid anyone non-employee compensation over $600, you’ll need to use Form 1099-NEC to report the payments for services you’ve received. Beginning in 2026, this threshold will increase to $2,000 and be adjusted for inflation thereafter.
If you received this form, here are the steps you need to take:
One of the nice things about receiving a 1099-NEC rather than a W-2 is that you can claim business deductions on your Schedule C, which you use to calculate your net profit from self-employment.
Your deductions have to be for business expenses that the IRS considers ordinary and necessary for your self-employment activities.
The cost of computer software is likely an ordinary and necessary expense for a freelance graphic designer. Something that would not be considered an ordinary and necessary business expense would be the cost of hiring a high-end limousine to travel to clients, which may be helpful but is not ordinary or necessary by tax standards.
TurboTax Tip:
“If you’re self-employed, you’re responsible for paying Social Security and Medicare taxes in addition to income taxes. This extra tax is known as the self-employment tax. However, you can deduct 50% of the self-employment tax you pay.” – Rocky Mengle, Attorney
When you use Schedule C, you will typically calculate your net profit by:
The final net profit figure is transferred to Form 1040 and combined with your other earnings, income, and deductions to calculate your taxable income.
Estimated tax payments are periodic payments you make to the IRS throughout the year if your income isn’t subject to withholding, such as income reported on a 1099-NEC. Unlike employees, who have taxes withheld from each payment, self-employed individuals typically need to pay their taxes throughout the year in installments rather than all at once when they file their tax return.
You may have to make up to four estimated tax payments to the IRS throughout the year. The amount and frequency of your estimated payments depends on:
Use Form 1040-ES to figure out your estimated tax obligations.
Similar to most tax forms, businesses need to file Form 1099-NEC on or before January 31. If you can’t meet that deadline, it’s important to note and prepare for penalties. If you are receiving a Form 1099-NEC, you can expect to get it in the mail by early February.
If you are required to file Form 1099-NEC because you made payments to someone, there are a few ways to handle it, including:
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