If you happen to’ve labored as an unbiased contractor throughout the previous yr, a Type 1099-NEC ought to have landed in your mailbox or inbox across the finish of January. Undecided what you have to be doing with this kind? Let’s speak about it.

What’s Type 1099-NEC?

The 1099-NEC, Nonemployee Revenue, is an informational kind that U.S. companies are required to ship to individuals they paid greater than $600 for providers over the last calendar yr.

In response to the IRS:

• You don’t essentially should have a enterprise for funds on your providers to be reported on Type 1099-NEC. It’s possible you’ll merely carry out providers as a non-employee.
• The payer has decided that an employer-employee relationship doesn’t exist in your case. You possibly can study extra about that right here.

So, what do you do for those who’re a kind of unbiased contractors who will get the shape?

Examine it with your individual books

The very very first thing you wish to do whenever you obtain Type 1099-NEC is to take a look at the whole in Field 1 – Nonemployee Compensation and decide whether or not it matches your monetary information.

Why is it so vital to verify that your 1099-NEC is appropriate? The IRS will get a replica of it, too. Which means it has tax implications for you.

What in case your Type 1099-NEC is improper?

Let’s say your consumer paid you $1,000 to design a emblem, however they by accident double-reported that quantity and instructed the IRS they paid you $2,000. So far as the IRS is worried, you made that $2,000 in earnings and now owe earnings tax on it. Ouch!

If you happen to discover that your 1099-NEC is wrong, contact the corporate that issued it ASAP.

If the corporate has already filed the misguided 1099-NEC with the IRS, then it would take extra effort on their half to appropriate the error, however most respected corporations are scrupulous about their bookkeeping and can enable you to out.

If you happen to can’t get your kind modified by the corporate that issued it, simply make certain your individual monetary information again up your story.

What for those who don’t obtain Type 1099-NEC?

Perhaps you assume it is best to obtain a Type 1099-NEC from a consumer, however you by no means get one.

As an entrepreneur, it looks as if it’s important to cross each “t” and dot each “i” your self. However on this case, you’re truly not obligated to do something. This was your consumer’s obligation, and in the event that they fail to ship you a Type 1099-NEC, they will face stiff penalties.

That mentioned, simply since you didn’t obtain a tax kind doesn’t imply that your earnings from that consumer isn’t taxable.

Report your entire earnings in your Schedule C whether or not your shoppers fulfill their reporting obligations or not.

In relation to taxes, it’s at all times higher to be secure than sorry.

The 1099-NEC was discontinued by the IRS in 1982, however has been reinstated as a result of some adjustments to tax kind due dates mandated by the Defend People from Tax Hikes (PATH) Act of 2015. So don’t be stunned for those who see a brand new tax kind in your mailbox or inbox in January of 2023!

The above content material shouldn’t be construed as authorized or tax recommendation. At all times seek the advice of an legal professional or tax skilled relating to your particular authorized or tax scenario.