Form 1099-MISC, Miscellaneous Information reports many kinds of miscellaneous payments totaling over $600 during the year. These include rents, prizes and awards, and certain medical payments. Independent contractors used to receive a 1099-MISC, but in 2020 the IRS introduced Form 1099-NEC for independent contractors.Form 1099-NEC, Nonemployee Compensation applies to all payments made for work performed by independent contractors, including freelancers and self-employed individuals. Some businesses mistakenly refer to independent contractors as "1099 employees," but actual employees receive a W-2, not a 1099-NEC.Determining whether a person performing work is an employee or contractor can prove controversial. Employees often receive benefits and only pay half of the FICA taxâ7.65% of wagesâwith the employer paying the rest. Independent contractors pay self-employment taxes instead of FICA and don't usually receive benefits. Many employers prefer to hire independent contractors rather than employees whenever possible. This can allow independent contractors to negotiate better compensation. Also, independent contractors can usually deduct business expenses.Individual independent contractors report nonfarm income from box 1 of the 1099-MISC on Schedule C attached to Form 1040âtheir income tax return. They must also file Schedule SE, Self-Employment Tax with their tax return to calculate their self-employment tax. Independent contractors often need to make estimated tax payments throughout the year because businesses usually don't withhold taxes for independent contractors.