Saturday, September 2, 2023 – Listen up, my independent contractor friends. I’m here to give you a wake-up call. Gone are the days of blending into the crowd with your 1099-MISC forms. The IRS, ever the keen observer, switched up the game in 2020. They’ve introduced a new form called the 1099-NEC—NEC standing for “Non-Employee Compensation.” Why? To make it a cinch for Uncle Sam to find out if you’re paying your self-employment tax.

If you’re not hip to the jargon, a 1099-NEC is basically a neon sign flashing “SELF-EMPLOYMENT TAX” over your head. Unlike the good ol’ days of 1099-MISC where you might’ve flown under the radar, the 1099-NEC is going to match you up neatly with IRS databases. Get it wrong, and you’ll receive a charming little note called a CP2000, giving you a rundown of what you owe—typically, it’s “pay more tax.”

What’s the tax, you ask? A hefty 15.3%. And let’s break it down for the mathematically challenged—12.4% is for social security, and 2.9% is for Medicare. This isn’t pocket change, folks.

Now, why am I hammering this home? Because if you’re an independent contractor, you ARE a business. Period. Start thinking about tax planning and the structure of your business like your livelihood depends on it. Why? Because it does.

---