Reporting expenses on a 1099-NEC (2024)

FAQs

Should 1099-NEC include expenses? ›

Yes, as indicated you would be allowed to deduct any amount for travel expenses that is part of the income reported on the 1099-NEC. Also, if there were expenses your daughter had that were not reimbursed, she would be allowed to deduct those as well.

Your deductions have to be for business expenses that the IRS considers ordinary and necessary for your self-employment activities. An expense is ordinary if it's incurred by self-employed individuals in a similar field. An expense is necessary if it's helpful to you in completing your work.

Businesses should report payments of nonemployee compensation totaling $600 or more on IRS Form 1099-NEC. Businesses that withhold federal income taxes from nonemployee payments should also file a 1099-NEC, even if it doesn't reach the $600 threshold.

if the expenses were reimbursed under an accountable plan, the reimbursem*nts are completely non-taxable. They should not have been reported on your W-2 or on a 1099, there should've been no paperwork at all.

Box 1 of Form 1099-NEC should include the total amount paid to any freelancers, contractors, or other non-employee individuals for business services, parts, and materials. Basically, it includes any money paid to someone who isn't on your payroll for business services they provided.

The 1099-NEC is the Internal Revenue Service (IRS) form to report nonemployee compensation—that is, pay from 1099 independent contractor jobs (also sometimes referred to as self-employment income). Examples of this include freelance work or driving for companies like Uber, Lyft, or DoorDash.

Self-employed income is calculated by adding up all the income recorded on your 1099 forms. This includes 1099-NEC, 1099-MISC and 1099-K forms. The total earned income is then subject to the independent contractor tax rate of 15.3%.

Other exceptions

Employee payments of wages, military differential while on active duty, business travel allowances, (reported on Form W-2). Cost of current life insurance protection. Payments to certain tax-exempt organizations and governments. Payments made to or for homeowners from certain state programs.

Payments made with a credit card or payment card and certain other types of payments, including third-party network transactions, must be reported on Form 1099-K by the payment settlement entity under section 6050W and are not subject to reporting on Form 1099-MISC.

The expense reimbursem*nt process allows employers to pay back employees who have spent their own money for business-related expenses. When employees receive an expense reimbursem*nt, typically they won't be required to report such payments as wages or income.

Can a 1099 employee claim expenses? ›

Can I write off expenses if I get a 1099? Yes, all self-employed individuals can write off business expenses. Self-employment includes 1099 contractors, freelancers, gig workers, and small business owners. You do not need to be incorporated as an LLC or corporation to file tax write-offs for business expenses.

Gross proceeds, such as settlement payments paid to an attorney, should not be reported on the 1099-NEC. Rather, it is reported on box 10 of the 1099-MISC. Only legal fees paid directly to the attorney are reported on 1099-NEC.

Payments you report are those you made in the course of your trade or business. Here are some examples of payments you need to report on the 1099-NEC: Professional service fees to architects, designers, accountants, software engineers, attorneys, and law firms.