TAX TIME: What Is A Form 1099-NEC And Do I Need One?
Here we are again…TAX TIME and this year there’s a new form in town, the 1099-NEC. It can be challenging to know exactly what is needed to file your taxes as a freelancer without adding new stuff to the mix. However, if you were organized throughout the past year, it shouldn’t be any more difficult than previous years.
For the most part, you might not even notice the change in forms you receive this year. However, let’s take a look at the difference between what we used to get, Form 1099-MISC, and this new document.
What is Form 1099-NEC?
Form 1099-NEC is a new form for 2020 and it’s specifically for reporting non-employee compensation. Non-employee compensation are payments to individuals not on a business payroll.
Non-employees are defined as all independent contractors, gig workers, or self-employed individuals who are “hired” on a contract basis to complete a project or assignment.
For example, I have four to six clients that I regularly work for. I am not considered an employee at any of their companies even though I’ve worked for one of them for over 15 years. Therefore, I am considered a non-employee.
Up until 2020, income for the above mentioned individuals was reported on Form 1099-MISC. This form is still available but it’s use has changed a bit now that Form 1099-NEC has come along.
1099-NEC versus 1099-MISC
So, which one are you supposed to get? Here’s a quick run down.
Form 1099-NEC is now used to report independent contractor income. So, if you’re a freelancer or independent contractor, this is the form you’re going to receive. To learn more about Form 1099-NEC and when to use it, read this helpful article.
Form 1099-MISC is still in use but it’s only used to report miscellaneous income from rent or payments to an attorney. For more details on when this form is used read this helpful article.
Who Receives a Form 1099-NEC?
Basically if you’ve been paid more than $600 in a tax year from one client or business, you should get this new form. However, if you, as an independent contractor are registered as a C corporation or S corporation, it is not required that you receive this form. If you are an freelance or independent contractor individual or you are registered as an LLC, you are required to receive this form.
Conclusion
Whether or not you’re required to receive Form 1099-NEC, you still have to file your taxes and report your income for the year. Keeping detailed Excel spreadsheets is one great way to keep track as well as printing and keeping a file of payments received.
For some tips on using Excel spreadsheets to help with tasks like this, check out some of these great Excel articles:
3 Ways Excel Can Help You Track Your Freelance Income And Expenses
Top Excel Features Every Freelancer Should Know About
5 Excel Shortcuts to Drastically Speed Up Data Entry
Veronica Buhl is a freelance social media manager, who has been a writer, editor, proofreader, summary writer, and transcriptionist for some of the top motivational and self-improvement speakers in the world. She has also helped numerous clients develop their websites, blogs, and social media presence in order to promote their businesses, non-profits, and projects. She is the author of the book, Making Your Business A Social Media Superstar, and is co-author of the book, The Massage Disadvantage. Her official website can be found at www.veronicabuhl.com
