1099-NEC
[Updated Feb 6, 2024]
NOTE: Beginning tax year 2020, non-employee compensation is reported to the recipient on IRS Form 1099-NEC (NonEmployee Compensation). (Prior to tax year 2020, payment for non-employee compensation (that is, independent contractors) was reported to the recipient on IRS Form 1099 MISC.)
NOTE: As of Feb 2021, not all IRS pages have been updated. Some discussion of non-employee compensation may still refer to the 1099-MISC.
Self-Employment Income and the 1099-NEC and 1099-MISC
IRS Form 1099-NEC is used by one person or company who pays an independent contractor for services, to report the total amount of payments for those services made in a calendar year (Jan 1 - Dec 31). It is not completed by the independent contractor, it is received by the independent contractor. The independent contractor receives the 1099-NEC after it is completed by the person or company who made payments to the independent contract for services provided. The independent contractor will use the completed form when preparing the federal and state personal income returns.
The payer is required to send to the independent contractor the completed 1099-NEC by January 31 with the total amount of money paid to the contractor in the previous calendar year (Jan 1 - Dec 31).
If you are working as a independent contractor, make sure the person or company for whom you provided services has current address and your name and SSN recorded the same way as it appears on your SSN card.
For more information see https://www.irs.gov/forms-pubs/about-form-1099-NEC.
Oregon’s Independent Contractor Laws - Employee or Independent Contractor?
See https://www.oregon.gov/ic/Pages/laws.aspx and Employee or Independent Contractor?
Review the links above to see if you should be classified as an employee or independent contractor.
Self-Employment Income Tax and the Nonresident Alien
" . . . the Internal Revenue Code also provides an exemption from self-employment tax on the self-employment income of NONRESIDENT ALIENS."
from "Social Security/Medicare and Self-Employment Tax Liability of Foreign Students, Scholars, Teachers, Researchers, and Trainee" updated 05-Aug-2021, accessed February 22, 2022
See more below at "FICA"
Self-Employment and Oregon related taxes
Self-employed individuals doing work in the Trimet and Lane Country transit area are subject to TriMet Self-Employment Tax and the Lane County Self-Employment tax. See the 2021 version of the TriMet Self-Employment Tax form for more information regarding the Trimet tax.
Self-employed individuals are not subject to the State-wide Transit Tax. See https://www.oregon.gov/DOR/programs/businesses/Pages/statewide-transit-tax.aspx
Incomes taxes, both federal and state, due on payments made to a independent contractor.
When a person is working as an employee, and the wages are paid by the employer, and the employer is required to withhold a portion of the wages for federal and state income taxes. The amounts withheld are an advance payment to the IRS and state for the income taxes that will be due on the federal and state income tax return forms.
When a person is working as an independent contractor, the amounts paid to the independent contractor are paid in full to the contractor and are often paid without federal and state withholding for income taxes.
If services are provided as an independent contractor and no federal or state taxes are withheld from payment, it is the responsibility for the contractor to make periodic (quarterly) payments to the federal and state government the year. Failure to have sufficient funds withheld during the year can result in a penalty being assessed when the federal and state income tax forms are completed.
Full instructions for calculating your estimated tax payments are in IRS Form 1040-ES. See following.
Should I be making estimated payments to the IRS and State of Oregon?
See Estimated Payments for information regarding this question.
FICA
If your status is nonresident alien, your pay, whether as employee or contractor, is not subject to FICA tax withholding (Social Security and Medicare taxes).
If your status is resident alien, your pay is subject to FICA taxes even though you may still be on your F or J visa.
See FICA for more information.
When a person is working as an employee and a resident alien, the employer will withhold 7.65% of the wages from the paycheck for FICA taxes. The employer will also pay to the government a matching portion (7.65%). The total of the amount withheld from the employee's check and the amount paid by the employer is 15.3%.
When a person is working as a contractor and a resident alien, the amounts paid to the contractor will be subject to a self-employment tax (FICA) of 15.3%. This amount will be calculated on your federal tax return. Your quarterly estimated tax payments should include the amount that will be applied to the self-employment tax.