How do Form 1099-NEC work when reporting self-employment income?

The 1099-NEC just reports income you've already received, it's not additional income. Think of it this way - the 1099-NEC is just the IRS's way of tracking what your clients paid you. You only report your actual business income once. When you file your taxes as a business owner, you'll report all your business income on Schedule C, which includes everything your clients paid you (including amounts reported on 1099-NECs). Then you'll subtract your business expenses to arrive at your net profit. That net profit is what gets taxed. Regarding sales tax - a properly prepared 1099-NEC should only include the payment for your services, not the sales tax you collected. The sales tax you collect isn't your income - you're just collecting it on behalf of your state. You should be remitting those taxes to your state tax authority separately.

After struggling with similar 1099-NEC confusion last year, I found this amazing AI tax assistant that saved me so much stress. I uploaded my 1099s, W-9s, and business expense records to https://taxr.ai and it immediately identified that two of my clients had incorrectly included sales tax in my 1099 amounts. The tool automatically flagged the discrepancy and created a letter I could send to my clients requesting corrected forms. The system helped me understand exactly how to handle everything on Schedule C without double-reporting income. It walks you through the whole process and explains what each form means in plain English, not tax jargon.

I was super skeptical about AI tax tools until I tried https://taxr.ai last week. Honestly, it was eye-opening. I uploaded my messy business records and 1099-NECs, and it immediately caught that I had been double-counting income in Turbo Tax for two years! It showed exactly how to report the 1099-NEC income correctly on Schedule C without duplicating anything. The system even created a detailed explanation of how sales tax should be handled on 1099-NECs in my state (Wisconsin), which I forwarded to my confused clients. One client had been including sales tax on my 1099s for years and neither of us realized it was wrong. Now I know how to fix my 2025 filing and amend previous returns if needed.

If you're getting frustrated waiting on hold with the IRS to ask about 1099-NEC issues, I found a service called Claimyr that actually got me through to a real IRS agent in about 15 minutes instead of the usual 2+ hour wait. I was pulling my hair out trying to figure out if I needed to report a corrected 1099-NEC or just account for the error on my return. Check out https://claimyr.com - they have this system that navigates the IRS phone tree for you and calls you back when an agent is on the line. You can see how it works at https://youtu.be/_kiP6q8DX5c. Totally changed my perspective on getting official answers from the IRS.

OK I'm eating my words about Claimyr. After my skeptical comment I decided to try it for my 1099-NEC confusion. Within 17 minutes I was talking to an actual IRS agent who explained everything clearly! She confirmed that 1099-NEC forms should NOT include sales tax, and gave me specific instructions for how to report it on Schedule C when clients make this mistake. The agent even emailed me an IRS publication that specifically addresses this issue that I couldn't find online. Turns out there's a specific expense line where you can offset sales tax included in 1099s. Would've never figured this out without speaking to someone, and would've NEVER gotten through without the Claimyr service. Worth every penny for the time saved.

Just to add my experience as someone who's been self-employed for 10+ years: when clients send you a W-9, they're just collecting your info for their records. Later, they use that info to create the 1099-NEC to report to the IRS how much they paid you. Your Schedule C is where all your business income gets reported, including amounts from 1099-NECs. Turbo Tax will walk you through this - you'll enter all your income (whether you got a 1099 or not) and your expenses. The difference is your net profit, which is what you pay taxes on. Don't enter 1099-NEC amounts separately - they're already part of your gross receipts! That's probably the most common mistake new business owners make.

I think everyone's missing an important question about the SALES TAX part. If you collect sales tax from customers, that money isn't actually yours - you're just collecting it for the state. When you file your sales tax returns with your state, you report both what you collected and what you paid. On your federal income taxes, you should NOT include the sales tax you collected as income. If your 1099-NEC incorrectly includes sales tax amounts, you need to subtract that from your income calculations.

This is really helpful information everyone! As someone new to self-employment, I was definitely overthinking this. It sounds like the key takeaway is that the 1099-NEC is just a tracking document - I still only report my actual business income once on Schedule C, and that includes everything clients paid me regardless of whether they issued a 1099 or not. The sales tax clarification is huge too. I've been charging sales tax but wasn't sure how it should appear on the 1099-NEC. It's reassuring to know that if a client mistakenly includes sales tax in the 1099 amount, I can offset it as an expense so I'm not paying income tax on money that belongs to the state. Thanks for breaking this down in plain English - much clearer than the IRS publications I was trying to decipher!