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Glossary term

Form 1099-NEC

IRS form for non-employee contractor payments.

Definition

Form 1099-NEC (Nonemployee Compensation) is the IRS form used to report payments of $600 or more in a calendar year to non-employee independent contractors, freelancers, and gig workers. Contractors are not on the company's payroll cycle: they invoice the company and receive payment on the company's accounts-payable schedule, typically Net-30 or Net-60. Contractors are responsible for their own income tax and self-employment tax (15.3% covering both halves of FICA). Misclassifying employees as contractors to avoid payroll taxes is a frequent target of IRS and Department of Labor enforcement.

Example

A freelance graphic designer paid $5,000 for a project receives a 1099-NEC, not a W-2.

Related terms

  • Pay period — The recurring window of time covered by a single paycheck.
  • Pay frequency — How often paychecks are issued.
  • Payday — The calendar day wages are deposited.
  • In arrears — Wages paid after the pay period ends.
  • Biweekly — Every other week — 26 paychecks per year.
  • Semimonthly — Twice per month on fixed dates — 24 paychecks per year.

See also