Definition
The IRS form a business uses to report nonemployee compensation: payments to independent contractors, freelancers, and other self-employed workers who are not on payroll. The business files one for each contractor paid above a small annual threshold and sends the contractor a copy by the end of January.
Why it matters
The 1099-NEC is the signal that no taxes were withheld: the full income tax and self-employment tax on that money is yours to pay, typically through quarterly estimates. The IRS receives the same copy you do, so unreported 1099-NEC income is easy to catch.
Example
A consultant receives four 1099-NEC forms totaling $48,000. Nothing was withheld, so they report the income on Schedule C, deduct $8,000 of expenses, and pay income tax plus self-employment tax on the $40,000 of net profit through four quarterly estimated payments during the year.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.