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Capital Absorption Risk · Labor

1099 Independent Contractors and Non-Employee Compensation

Definition

Payments for services to people and firms who are not employees, so no tax is withheld and the payer instead files an information return, now Form 1099-NEC.[1] The reporting threshold rises from $600 to $2,000 for payments after December 31, 2025,[2] and returns reporting nonemployee compensation are due by January 31.[3]

Federal law

  1. Internal Revenue Code of 1954, Pub. L. 83-591, ch. 736, § 6041, 68A Stat. 3 (26 U.S.C. § 6041). Requires information returns for payments made in the course of a trade or business (26 U.S.C. § 6041). Official text: govinfo.gov, U.S. Government Publishing Office.
  2. One Big Beautiful Bill Act (popular name), Pub. L. 119-21, § 70433, 139 Stat. 243 (26 U.S.C. § 6041(a), (h)). Raised the § 6041(a) reporting threshold from $600 to $2,000, indexed after 2026 (26 U.S.C. § 6041(a), (h)). Official text: govinfo.gov, U.S. Government Publishing Office.
  3. Protecting Americans from Tax Hikes Act of 2015 (Consolidated Appropriations Act, 2016, div. Q), Pub. L. 114-113, div. Q, title II, § 201, 129 Stat. 3076 (26 U.S.C. § 6071(c)). Set January 31 as the filing deadline for returns reporting nonemployee compensation (26 U.S.C. § 6071(c)). Official text: govinfo.gov, U.S. Government Publishing Office.
  4. Fair Labor Standards Act of 1938, Act of June 25, 1938, ch. 676, §§ 3(g), 6, 7, 52 Stat. 1060 (29 U.S.C. §§ 203(g), 206, 207). Defines 'employ' for federal minimum wage and overtime purposes (29 U.S.C. § 203(g)). Official text: govinfo.gov, U.S. Government Publishing Office.