Is nonemployee compensation the same as state income?

[IsabellaG · Accepted solution]

No, nonemployee compensation is when you were paid for services and you weren't treated as an employee, with federal taxes and Social Security withheld from your pay. Contractors and freelance workers get this kind of pay. If you received a 1099-MISC with an amount in Box 7 for Nonemployee Compensation, you are generally considered to be self-employed. You would be subject to self-employment tax, which is for Social Security, as well as regular income tax.

[daylime]

Just reviving this thread. On the 1099-NEC there is Box 1, non employee compensation, and then there's Box 7, state income. If I want to file 1099-NECs for several contractors who provide service to my business to both the Fed (IRS) and State (DOR), do I need to fill in Box 7? Or does the state just use Box 1 when determining the compensation paid to the contractor, whether federal or state? According to the expert reply above, even if I'm reporting to the State, I should not report the same non-employee compensation amount in Box 7. Maybe another way to ask the question is, what determine (a) if there should be an amount in Box 7 and (b) what that amount is?

[AbrahamT]

There's usually no amount in Box 7. Whatever amount is reported in Box 1 is always carried over to the state tax

and the cx pays state income tax on that amount as well. Unless, there was state income tax withheld on this income, that would typically be recorded in Box 5. See HERE for instructions. Pg. 5.

[daylime]

@AbrahamT , thank you! That makes sense. So do I even put my State/Payer State No (which I believe is simply my TIN) in Box 6 even if there's nothing in Box 7? Should I be reporting $0 in Box 7 or leave blank? Thank you!

[ThomasM125]

You should just leave box 6 and box 7 blank if there is no amount in box 7.

@daylime