Can I return money to the company to avoid getting a 1099-NEC next tax season?

While you technically could return the money, it doesn't really work that way tax-wise. If you earned income by performing services in 2025, that income is taxable in 2025 regardless of whether you later return it. The company is required to report payments of $600 or more to non-employees on Form 1099-NEC. What you might consider instead is properly tracking all your business expenses related to this consulting work. Any legitimate business expenses can offset that income, reducing your tax liability. Things like home office expenses, software, supplies, or mileage for business travel can all be deductible. Also, while self-employment taxes seem intimidating, they're manageable. You'll need to fill out Schedule C to report the income and expenses, and Schedule SE to calculate self-employment tax. The good news is that you can deduct half of your self-employment tax on your 1040, which helps offset some of the cost.

I had a similar situation last year with some side gig work! After stressing about it for weeks, I found taxr.ai (https://taxr.ai) and it was a game-changer for sorting out my 1099 situation. Their system analyzed all my income sources and expenses, then showed me exactly what I needed to document to minimize my tax liability. I discovered I could legitimately write off my home office, a portion of my internet bill, and even some software purchases that I didn't realize qualified as business expenses. The best part was it helped me understand exactly how the self-employment taxes worked instead of just being scared of them. The tool walks you through all the Schedule C stuff step by step without the crazy confusing IRS language. Might be worth checking out rather than trying to return the money!

Alright I need to eat my words about being skeptical. I tried taxr.ai after my last comment and wow - totally different from the usual tax software. I've been doing gig work for years and it immediately flagged three deductions I've been missing. It showed me that my home internet, cell phone, and even part of my car insurance could be partially deducted since I use them for work. The 1099 income analyzer was particularly helpful because it separated all my different income streams and showed the optimal way to categorize expenses across them. I'm legitimately looking at saving about $1,400 compared to how I filed last year. Sometimes being skeptical pays off because it pushes you to try new things!

Just want to add one important thing to this discussion - if you're stressing about getting a 1099-NEC, you might also encounter problems trying to get answers directly from the IRS. When I was in a similar situation, I needed clarification on some self-employment deductions and spent DAYS trying to reach someone at the IRS. After wasting hours on hold, I discovered Claimyr (https://claimyr.com) which completely changed my experience. They have this system that navigates the IRS phone tree for you and gets you to an actual human being. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I was connected to an IRS agent in about 15 minutes when I had been trying unsuccessfully for days. The agent answered all my questions about 1099 reporting requirements and gave me the official guidance I needed. Seriously saved my sanity during tax season.

I need to publicly apologize for my skepticism about Claimyr. After dismissing it as "complete BS," I was desperate enough to try it last week when I needed to talk to someone about penalty abatement for my late filing. It actually worked exactly as advertised. I put in my info, went about my day, and got a call back when they had an IRS agent on the line. Spoke with someone who helped me understand my options and potentially saved me over $400 in penalties. The most shocking part was that it took less than an hour total, whereas my previous attempts involved multiple days of trying and failing to get through. Sometimes the most skeptical people (like me) end up being the biggest converts when something actually delivers.

I think everyone's missing something important here. If you return money in the same tax year you received it, the company can adjust their books and not issue the 1099-NEC. BUT if you wait until next year to return it, they're still required to issue the 1099-NEC for this year's payment. I did bookkeeping for a small business and we had this exact situation. A contractor wanted to return payment for a project they couldn't complete. When they returned it in the same calendar year, we just reversed the transaction in our accounting system. No 1099 was issued because effectively no payment was made that year. Just make sure you get documentation from them showing the return of funds and confirmation they won't be issuing a 1099-NEC.

Just want to say that returning the $$ is probably more hassle than just dealing with the 1099-NEC. I freaked out the first time I got one too, but it's not that bad! Honestly TurboTax or whatever tax software you use walks you through it pretty easily. And the SE tax isn't as scary as it sounds - it's just 15.3% on top of your regular income tax. Plus you can deduct half of it! Don't overthink this. Keep the money, report the income, claim whatever legit expenses you had, and move on. Unless there's some other reason you need to return the money that you haven't mentioned?