By the Legal Assistance Division

Rebranded Tax Form for Non-Employee Compensation Explained

Self-employed individuals and others receiving payments from a third-party are required to report income they receive in situations different from a conventional employer-employee relationship. In conventional employer-employee situations, the employer issues a W-2 to their employee. In the unconventional situations, for many years, the employer issued an Internal Revenue Service (IRS) form 1099-MISC (Miscellaneous) that disclosed to the IRS and the self-employed employee how much the employee was paid, directing the employee to report this income on their tax return.


Recently, the IRS decided to reboot an old form, 1099-NEC, to cover the reporting of non-employee compensation. It replaces part of the 1099-MISC. The 1099-MISC, has been used for years for multiple purposes, such as reporting commissions, self-employment income and other taxable payments that don’t qualify as employee compensation. The 1099-MISC has been changed and all non-employee compensation is now reported on the 1099-NEC. The 1099-MISC, box 3 is still used for other income. This other income may include rents received, moving expense payments, prizes and awards. Many companies hire subcontractors and self-employed individuals to perform services that they do not perform themselves. Companies report these outlays as an expense and provide the 1099-NEC for services rendered to the individual who performed the services. The individual who receives a 1099-NEC with an amount in box 1 for services performed usually must account for this income on their tax return via a schedule C and will be required to pay Social Security, Medicare and income tax on the amount received. The 1099-NEC is provided to the individual who performed a service and this income is reportable to the IRS and the individual’s State, and it is taxable.


If you have questions, IRS Taxpayer Advocates are available to answer questions related to a wide range of IRS Tax issues. Information can be found at:


If you would like to schedule an appointment with an attorney in the Fort Meade legal assistance office, please call: 301-677-9504/9536.