This article will help you enter income and withholding from Form 1099-NEC in Lacerte. 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.
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.
Table of contents:
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 income. Enter the amount on:
- Screen 16 Business Income (Sch. C), or
- Screen 19 Farm Income (Sch. F, 4835)
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:
- Go to Screen 14.1 SS Benefits, Alimony, Miscellaneous Inc.
- Scroll down to the Alimony and Other Income section.
- 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
- Go to Screen 14.1 SS Benefits, Alimony, Miscellaneous Inc.
- Scroll down to the Alimony and Other Income section.
- Enter the amount and a description in Other income (Ctrl+E).
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 Lacerte 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.
- Go to Screen 14.1 SS Benefits, Alimony, Miscellaneous Inc.
- Select the Add button on the left side of your screen to create a new 1099-MISC/NEC for e-file.
- Enter the Payer Information from Form 1099-NEC.
- Scroll down to the 1099-NEC subsection.
- Enter the box 1 amount in (1) Nonemployee compensation.
- Enter the box 4 amount in (4) Federal income tax withheld.
- Enter the box 5 amount in State tax withheld, and select the appropriate state from the drop-down menu.
- Enter the box 6 identifier in Payer’s state no.
- Enter the box 7 amount in State income.
