Form 1099-NEC (Non-Employee Compensation) replaced the old Box 7 of Form 1099-MISC starting in tax year 2020. Businesses that pay a freelancer, contractor, or non-employee $600 or more in a calendar year are required to issue a 1099-NEC by January 31 of the following year.
What 1099-NEC means for your taxes
Receiving a 1099-NEC means:
- The income is reported to the IRS — the payer sends a copy to the IRS simultaneously
- You must report this income on Schedule C (if self-employed) or as “other income” if it doesn’t rise to the level of a trade or business
- The income is subject to self-employment tax (Schedule SE) at 15.3% on the first $168,600 of net earnings (2025 rate — verify for 2026)
- You are responsible for quarterly estimated taxes if you expect to owe more than $1,000 in the year
Who issues 1099-NEC
Businesses are required to issue 1099-NEC when they pay:
- Freelancers, consultants, contractors
- Attorneys (always, regardless of amount)
- Gig platform drivers and delivery workers (though platforms over $20K/200 transactions use 1099-K instead — this threshold changed multiple times 2022-2026, verify current rules)
What if you don’t receive a 1099-NEC?
You are still legally required to report all income, with or without a 1099-NEC. The $600 threshold is for the business’s filing obligation, not yours. If a client pays you $400 and doesn’t file a 1099-NEC, you still owe tax on that $400.
How tax software handles 1099-NEC
Every major consumer tax software handles 1099-NEC input. The key question is which tier it requires:
| Software | 1099-NEC included at? | All-in cost |
|---|---|---|
| FreeTaxUSA | Free federal | $14.99 |
| Cash App Taxes | Free | $0 |
| TurboTax | Self-Employed ($129+) | $188+ |
| H&R Block | Self-Employed ($85+) | $122+ |
| TaxAct | Self-Employed ($69.99+) | $109.98+ |
FreeTaxUSA and Cash App Taxes handle Form 1099-NEC at no additional cost. TurboTax requires the Self-Employed tier, which is $129 federal before state fees.
1099-NEC vs 1099-K: the key difference
1099-NEC: issued by a specific business for services you performed for them directly (e.g., your client company pays you for design work).
1099-K: issued by payment processors and platforms (PayPal, Stripe, Venmo, Etsy, eBay) when you receive payments over the reporting threshold. The threshold has changed multiple times — verify the current rule for your tax year.
Both forms report income you owe tax on, but they come from different sources. You may receive both in the same tax year.