For those who’ve labored as an impartial contractor in the course of the previous 12 months, a Kind 1099-NEC ought to have landed in your mailbox or inbox across the finish of January. Unsure what try to be doing with this way? Let’s discuss it.

What’s Kind 1099-NEC?

The 1099-NEC, Nonemployee Earnings, is an informational type that U.S. companies are required to ship to folks they paid greater than $600 for providers over the last calendar 12 months.

In keeping with the IRS:

• You don’t essentially must have a enterprise for funds in your providers to be reported on Kind 1099-NEC. You could 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 be taught extra about that right here.

So, what do you do when you’re a kind of impartial contractors who will get the shape?

Examine it with your individual books

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

Why is it so essential to substantiate that your 1099-NEC is right? The IRS will get a duplicate of it, too. Meaning it has tax implications for you.

What in case your Kind 1099-NEC is unsuitable?

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

For those who discover that your 1099-NEC is inaccurate, contact the corporate that issued it ASAP.

If the corporate has already filed the faulty 1099-NEC with the IRS, then it would take extra effort on their half to right the error, however most respected firms are scrupulous about their bookkeeping and can provide help to out.

For those who can’t get your type modified by the corporate that issued it, simply make sure your individual monetary information again up your story.

What when you don’t obtain Kind 1099-NEC?

Possibly you suppose it’s best to obtain a Kind 1099-NEC from a shopper, however you by no means get one.

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

That stated, simply since you didn’t obtain a tax type doesn’t imply that your revenue from that shopper isn’t taxable.

Report your whole revenue in your Schedule C whether or not your purchasers fulfill their reporting obligations or not.

Relating 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 because of some modifications to tax type due dates mandated by the Defend Individuals from Tax Hikes (PATH) Act of 2015. So don’t be stunned when you see a brand new tax type in your mailbox or inbox in January of 2023!

The above content material shouldn’t be construed as authorized or tax recommendation. All the time seek the advice of an legal professional or tax skilled concerning your particular authorized or tax scenario.