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How to enter Form 1099-NEC, Nonemployee Compensation

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How to enter Form 1099-NEC, Nonemployee Compensation

This article will help you enter income and withholding from Form 1099-NEC in ProConnect Tax. Starting in tax year 2020, nonemployee compensation may be reported to your client on Form 1099-NEC. In previous years, this type of income was typically reported on Form 1099-MISC, box 7.

Where do I enter box 1, nonemployee compensation?

Where you enter nonemployee compensation depends on how your client earned this income, and whether or not they’re self-employed.

If your client is self-employed

 You should include the amount on Schedule C or Schedule F as gross receipts. 

  1. On the left-side menu, select Income.
  2. Click on the Business Income (Sch C) screen, or the Farm Income (Sch F, 4835) screen.
  3. Select the Income Statement section along the top of the input.
  4. Enter the amount in Gross receipts or sales for Sch. C filers, or the appropriate farm income field for Sch. F.

If your client received this income as an employee

If your client believes they’re an employee, and received Form 1099-NEC in lieu of a W-2, they should request corrected tax forms from the payer. 

If they can’t get the correct forms:

  1. On the left-side menu, select Income.
  2. Click on the SS Benefits, Alimony, Misc. Income screen.
  3. Scroll down to the Alimony and Other Income section.
  4. Enter the amount in Uncollected social security and Medicare tax on wages (8919).

The compensation amount will be reported on the 1040 as wages and will be used to complete Form 8919.

If the income is from a hobby or sporadic activity

  1. On the left-side menu, select Income.
  2. Click on the SS Benefits, Alimony, Misc. Income screen.
  3. Scroll down to the Alimony and Other Income section.
  4. Enter the amount and a description in Other income (Click on button to expand).

The amount will be reported on Form 1040, Schedule 1, line 8, as other income, and will not be treated as subject to self-employment tax or uncollected social security and Medicare on wages.

Where do I enter boxes 4-7, state and federal withholding?

In order to claim tax withheld on 1099-NEC income, the IRS and most states require ProConnect Tax to recreate a digital copy of the Form 1099-NEC your client received and include it in the e-filed return. The program uses your input in Form 1099-MISC/NEC for E-File Returns to meet this agency requirement, AND to report withholding amounts on the appropriate federal or state return.

  1. On the left-side menu, select Income.
  2. Click on the SS Benefits, Alimony, Misc. Income screen.
  3. Select the Form 1099-MISC/NEC hyperlink at the top right of the input.
  4. Enter the Payer Information from Form 1099-NEC.
  5. Scroll down to the 1099-NEC subsection.
  6. Enter the box 1 amount in (1) Nonemployee compensation.
  7. Enter the box 4 amount in (4) Federal income tax withheld.
  8. Enter the box 5 amount in State tax withheld, and select the appropriate state from the drop-down menu.
  9. Enter the box 6 amount in Payer’s state no.
  10. Enter the box 7 amount in State income.

Important: Income amounts entered on this screen, including (1) Nonemployee compensation and the box 7 State income entry, will not flow to the tax returns. You must follow the steps above for entering box 1 amounts in addition to completing this screen when withholding is present.

However, federal and state tax withheld entered on this screen do flow to the appropriate line of the tax return (Form 1040, line 25b, for federal amounts). This withholding should not be duplicated or re-entered anywhere else in the tax return.

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