1099-NEC

I just sat down and started looking at the 1099’s that came in for 2020 race winnings.

Much to my surprise some (not all) are 1099- NEC. I don’t know what these are, other than what I got off the internet. Here’s what it says…..

You are an individual hired to do work for - or provide services to - another individual or agency as a non-employee.

Independent contractors/freelancers may receive the following documents:

NEW! Form 1099-NEC is for reporting non-employee compensation*
Form 1099-K

*Form 1099-NEC is used only to report payments to independent contractors, freelancers, vendors, consultants and other self-employed individuals (commonly referred to as 1099 workers).

There isn’t a race track that “Hired Me” to pay them to race.

What do I need to know about this????

Ill have to watch for that this year. All my 1099's for the business and racing for 2020 came in as 1099 misc. I had not heard of or seen those 1099 nec yet.

Our local track also sent a 1099-NEC. Still waiting on a few others including SFG.

From what I understand any 1099 misc for non employee compensation from the past will now be on the 1099 NEC. I had to issue that to a contractor for my business.

From what I’ve read and looking at the tax code (as a non-professional) this is my assessment.

Because 1099-NEC is now being used instead of 1099-MISC they have labeled the racer that, is NOT providing a service, and, does NOT own or operate a business, a BUSINESS.

Because of this, one now is expected to pay Self-Employment Tax (Social Security and Medicare taxes on the net earnings from their business, that’s not a business) on this “Prize” money.

PLEASE... TELL AND SHOW ME I'M WRONG......

quote:

Originally posted by markemark:
From what I’ve read and looking at the tax code (as a non-professional) this is my assessment.

Because 1099-NEC is now being used instead of 1099-MISC they have labeled the racer that, is NOT providing a service, and, does NOT own or operate a business, a BUSINESS.

Because of this, one now is expected to pay Self-Employment Tax (Social Security and Medicare taxes on the net earnings from their business, that’s not a business) on this “Prize” money.

PLEASE... TELL AND SHOW ME I'M WRONG......

On any 1099 income over $600, you are going to pay taxes on. I'm not sure what your point is.

I, also, am not a professional, but in my opinion is that if the nec is replacing the misc, the reporting process will stay the same. I only pay S.E.T on income reported on schedule C, and put any other income I get, I.E racing, on schedule 1. So no, you are not wrong, but I havent seen anything yet to make me have to put racing as a business unless I claim expenses, which I don't.

On a related note, those of us that get 1099s instead of w2s, I have one customer that I have been doing business with for 10+ years that has never once sent me a 1099. My question is how do they claim that expense if there is no paper trail. I know that everything over $400 has to be 1099'd. It doesnt matter to me as I claim the income anyway but was just wondering why they would pass up a mid five figure expense, which is what they pay me a year on average. There must be another way to deduct that.

quote:

Originally posted by TonyB6255:

quote:

Originally posted by markemark:
From what I’ve read and looking at the tax code (as a non-professional) this is my assessment.

Because 1099-NEC is now being used instead of 1099-MISC they have labeled the racer that, is NOT providing a service, and, does NOT own or operate a business, a BUSINESS.

Because of this, one now is expected to pay Self-Employment Tax (Social Security and Medicare taxes on the net earnings from their business, that’s not a business) on this “Prize” money.

PLEASE... TELL AND SHOW ME I'M WRONG......

On any 1099 income over $600, you are going to pay taxes on. I'm not sure what your point is.

His point is simple, he's not providing a service, yet he's being taxed as an employee.

quote:

Originally posted by qtrrcr:
I, also, am not a professional, but in my opinion is that if the nec is replacing the misc, the reporting process will stay the same. I only pay S.E.T on income reported on schedule C, and put any other income I get, I.E racing, on schedule 1. So no, you are not wrong, but I havent seen anything yet to make me have to put racing as a business unless I claim expenses, which I don't.

I believe you will now, because your 1099-NEC labels your Racing Prize as a Non-Employee for a "service" you provided, and paying you as such, will be listed on Schedule C.

And for those that never used Schedule C, because you don’t have, own or run a business, but received a 1099-NEC, will be filling out Schedule C.

BTW... NEC is NOT replacing MISC

Well, now thats just stupid. Ill show them, I wont win anything anymore. That'll teach'em.
I havent seen a nec yet, everthing I got was on a misc. I just thought the nec was replacing the misc from what was being said.

quote:

Originally posted by markemark:

quote:

Originally posted by qtrrcr:
I, also, am not a professional, but in my opinion is that if the nec is replacing the misc, the reporting process will stay the same. I only pay S.E.T on income reported on schedule C, and put any other income I get, I.E racing, on schedule 1. So no, you are not wrong, but I havent seen anything yet to make me have to put racing as a business unless I claim expenses, which I don't.

I believe you will now, because your 1099-NEC labels your Racing Prize as a Non-Employee for a "service" you provided, and paying you as such, will be listed on Schedule C.

And for those that never used Schedule C, because you don’t have, own or run a business, but received a 1099-NEC, will be filling out Schedule C.

BTW... NEC is NOT replacing MISC

Correct but it does replace anyone that would have been reported on 1099 Misc box 7. Non employee comp. If your track reported winnings in Box 3 (other income) of 1099 Misc, then they should still be using 1099 Misc.

https://www.irs.gov/instructions/i1099msc

In the top link, go down approximately 1/3 of the page to Box 3. Other Income . This details “Where” 1099-MISC is used in Prize money for NON- Service.

Enter other income of $600 or more required to be reported on Form “1099-MISC” that is not reportable in one of the other boxes on the form. Also enter in box 3 prizes and awards that are “NOT” for services performed.

Skip paragraph and go to next.

Do not include prizes and awards paid to your “Employees”. Report these on Form W-2. Do not include in box 3 prizes and awards for "Services Performed" by nonemployees, such as an award for the top commission salesperson. Report them in box 1 of Form 1099-NEC.

That makes more sense now, like they are separating income from work vs "hobbies", if im reading it correctly.

I was surprised when I received my 1099 for 2020 race winnings & will have to check to see if it's -NEC or -MISC.

I don't pay much attention to race winnings & with 2020 being the start of screwed-up race seasons. I only raced 8 races about half of what I normally run. While they were only locally run points races. I was surprised at the amount won. My wife reminded me that for a messed up season, I had an exceptionally great year. No 1st round loses, 1 2nd round loss & 7 races in the money.

https://bench.co/blog/tax-tips/1099-nec-vs-misc Should give you some insight on it...

^^^^^^^^ Yep !!!! Say exactly what I posted in my link from the IRS.

“Who requires a Form 1099-MISC?

If your business paid an individual or LLC at least $600 during the year in rent paid, legal settlements, or prize or award winnings, you are required to file a 1099-MISC.”

Call the track and tell them you think you got the wrong form, should be the MISC.

I double checked all my 1099's, they are all misc.

I looked at mine sent from the Strip Las Vegas & it was the -NEC.

quote:

Originally posted by B KING:
I looked at mine sent from the Strip Las Vegas & it was the -NEC.

I would contact them about changing it to a 1099 Misc. 1099 NEC should not be used for race payouts.