Form 1099-NEC Explained: How to Report on Form 1040

IRS Form 1099-NEC is used to report nonemployee compensation paid to an individual or a business entity. A business must generally file Form 1099-NEC if the amounts paid to such a person are $600 or more during the calendar year.

If an individual taxpayer receives a Form 1099-NEC, they must analyze the payment and their activities to determine the appropriate reporting.

Payments reported on Form 1099-NEC could be characterized in one of three ways:

1. The individual taxpayer is engaged in a trade or business, and the payments received are connected with such trade or business. The activity is conducted on a regular, frequent, and continuous basis. The earnings are reported on Schedule C and subject to federal income tax and self-employment taxes.
2. The individual taxpayer is NOT engaged in a trade or business because their activities are irregular, infrequent, and not continuous. Earnings should be reported as other income subject to federal income tax, but NOT subject to self-employment taxes.
3. The individual taxpayer is actively engaged in an activity without a profit motive, so the activity is a hobby. Earnings should be reported as hobby income on Schedule 1.

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[bojangles]

thanks man, i put the 1099 amount in the wrong place on Schedule 1, now im going to correct it since i saw this video, much appreciated!

[Eclectifying]

THANK YOU for doing this! I could not find any other information on the web for how to report this!

[Proudpapa]

Thank you!! Do you have to be an LLC in order to deduct expenses?

[Hotpepper]

Thank you for the video! It’s informative!
Question though… a husband received 1099-NEC on behalf of his wife’s business by mistake. I’m thinking to report 1099-NEC as other income and adjust the same amount to reduce zero for husband. Then, file schedule c with 1099NEC amount for wife. I appreciate if you can Let me know what you think?

[jaden]

I received a 1099 NEC for being a nurses aid I know I have to pay taxes on it but do I pay self employment taxes if I just work there and don't own a business?

[kceptional]

Hi there, thank you for this helpful material. In the case where I’m a full time W2 accountant (non CPA) and offering bookkeeping service part time (hybrid) is it better to be a 1099-NEC instead of a W2 worker?

[robertcarro-xl]

So my daughter received a 1099 NEC from employer, does she have to file anything or does the employer?

[JCotton]

I get clients who perform a function like refereeing a sports game. It's a regular activity year to year, but they're not thereby engaged in an active trade or business, so I don't want to put them on Schedule C and treat them as a business. Would you put them under Other Income or do you think they have to be put on Schedule C? Could such a thing be a hobby?

[Reymundo]

Should I file an amendment if a 1099 NEC arrive late however, I did account for that income when I filed my taxes.