For those who’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 ought to be doing with this kind? Let’s discuss it.
What’s Type 1099-NEC?
The 1099-NEC, Nonemployee Earnings, is an informational kind that U.S. companies are required to ship to folks they paid greater than $600 for companies over the past calendar yr.
- You don’t essentially should have a enterprise for funds on your companies to be reported on Type 1099-NEC. You might merely carry out companies 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 if you happen to’re a kind of unbiased contractors who will get the shape?
Examine it with your personal books
The very very first thing you need to do if you obtain Type 1099-NEC is to have a look at the full in Field 1 – Nonemployee Compensation and decide whether or not it matches your monetary data.
Why is it so vital to substantiate that your 1099-NEC is right? The IRS will get a duplicate of it, too. Which means it has tax implications for you.
What in case your Type 1099-NEC is incorrect?
Let’s say your shopper paid you $1,000 to design a emblem, however they by chance double-reported that quantity and advised 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!
For those who discover that your 1099-NEC is inaccurate, contact the corporate that issued it ASAP.
If the corporate has already filed the inaccurate 1099-NEC with the IRS, then it would take extra effort on their half to right the error, however most respected corporations are scrupulous about their bookkeeping and can provide help to out.
For those who can’t get your kind modified by the corporate that issued it, simply be certain your personal monetary data again up your story.
What if you happen to don’t obtain Type 1099-NEC?
Possibly you suppose you must obtain a Type 1099-NEC from a shopper, however you by no means get one.
As an entrepreneur, it looks like you must cross each “t” and dot each “i” your self. However on this case, you’re really not obligated to do something. This was your shopper’s obligation, and in the event that they fail to ship you a Type 1099-NEC, they’ll face stiff penalties.
That stated, simply since you didn’t obtain a tax kind doesn’t imply that your earnings from that shopper isn’t taxable.
Report all your earnings in your Schedule C whether or not your purchasers fulfill their reporting obligations or not.
On the subject of taxes, it’s all the time higher to be protected than sorry.
The 1099-NEC was discontinued by the IRS in 1982, however has been reinstated attributable to some modifications to tax kind due dates mandated by the Defend Individuals from Tax Hikes (PATH) Act of 2015. So don’t be shocked if you happen to 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. All the time seek the advice of an legal professional or tax skilled relating to your particular authorized or tax scenario.