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US Tax Forms

Form 1099-NEC: Purpose and Requirement

Varun GuptaBy Varun Gupta |Last Updated: January 3, 2026
Form 1099-NEC: Purpose and Requirement
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Form 1099-NEC is a form used to report payments made by businesses to nonemployees. It includes freelancers, independent contractors, and more. If the payment is $600 or more, then surely the non-employees receive this form from the businesses with which they worked. Form 1099-NEC can also be used by non-employees while filing their individual tax return.

Want to know more about Form 1099-NEC? Well, no need to go anywhere. In this blog, we have covered all this about this form, including who files it and when you know you are an independent worker. So, let's start reading.

Varun Gupta
Varun Gupta(Tax Expert)

Mr Varun is a tax expert with over 13 years of experience in US taxation, accounting, bookkeeping, and payroll. Mr Gupta has not prepared and reviewed over 5000 individual and corporate tax returns for CPA firms and businesses.

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Frequently Asked Questions

Form 1099-NEC is an IRS tax Form That Reports Non-employee Compensation. This Form is issued by Businesses to Freelancers, Independent Contractors, and Self-employed Individuals When They Pay $600 or More in a Financial Year for Their Services. Unlike the W-2 Form, employees have No Taxes withheld. Additionally, the Recipient is Accountable for Paying Their Own Self-Employment and Income Taxes.

Nonemployee Compensation, in Simple Words, Means Payments Made to People Who Do Not Work for Any Employee or Business but Provide Their Services. For Example, Consultants, Independent Contractors, Freelancers, and Gig Workers. If the Payment Amount Reaches $600 or More in a Financial Year, the Payee is Liable to Report It to the IRS through Form 1099-NEC.

Form 1099-NEC reports the Payments of $600 or Made Directly to Freelancers or Contractors for Their Services to a Business. Whereas, Form 1099-k Reports the Payments Processed via Third-party Platforms Like Stripe, Amazon, Paypal, or Uber Once the Amount is More Than a Certain Threshold.

Under the Federal & State Income Taxes, Based on the Tax Bracket of the Individual, 1099-nec Income Pays the Liable Taxes. Additionally, for Social Security and Medicare, the Applicable Self-employment Tax on 1099-NEC Income is 15.3%. For Instance, if Your Earnings Are $10,000 from 1099-NEC Work, Then You Are Liable to Pay Both Self-employment and Income Taxes. Further, by Claiming Your Business Expenses, Such as Travel, Software, Internet, and More, You Can Reduce Your Taxable Income.

Yes, Usually, the 1099-nec Income Tax is Higher Than the W-2 Income. It is Because the W-2 Employees Split Their Income Between Medicare and Social Security Taxes With Their Employer. However, the 1099 Individuals (Contractors) Pay 15.3% Full Self-employment Tax Themselves. However, Contractors to Reduce Their Taxable Income Get the Option to Claim Business Deductions, Which Employees Cannot have.