The IRS released a draft Form 1099-NEC (Rev. December 2026) on April 9, 2026 — and it contains the most significant structural changes to this form since it was reintroduced in 2020. Box 1 splits into four sub-boxes, a brand-new Box 3 appears, and the form now captures data that did not exist a year ago.
If you file 1099-NEC forms for independent contractors, freelancers, or other nonemployees, these updates will directly affect how you prepare and submit returns for tax year 2026.
Why Is the IRS Changing the 1099-NEC?
The changes are driven by the No Tax on Tips and No Tax on Overtime provisions signed into law as part of the One Big Beautiful Bill Act. These provisions created two new above-the-line deductions for workers:
- Qualified Tip Deduction — Eligible workers can deduct qualified tips from their taxable income, calculated on the new Schedule 1-A (Form 1040), Part II.
- Qualified Overtime Compensation Deduction — Eligible workers can deduct qualified overtime pay, calculated on Schedule 1-A, Part III.
For these deductions to work, the IRS needs payers to separately report tip and overtime amounts on information returns. That is the entire purpose of the new sub-boxes. Without them, there would be no way for the IRS to verify deduction claims against amounts actually reported by payers.
The golden parachute payment move from the 1099-MISC to the 1099-NEC is a separate organizational change that better aligns the reporting with each form’s purpose.
What Changed on the 2026 Draft 1099-NEC
Here is a complete breakdown of every change between the current form (Rev. January 2024, used for tax years 2024 and 2025) and the new draft.
Box 1 Splits Into Four Sub-Boxes
The single “Box 1: Nonemployee compensation” field that filers have used since 2020 is now divided into four distinct parts:
| Box | Label | Status |
|---|---|---|
| 1a | Nonemployee compensation | Renamed from “Box 1” — still the total |
| 1b | Cash tips | NEW |
| 1c | TTOC (Treasury Tipped Occupation Code) | NEW |
| 1d | Overtime compensation | NEW |
Key detail: The amounts in Box 1b (cash tips) and Box 1d (overtime compensation) are included in the Box 1a total — they are not additional amounts. Box 1a remains the total nonemployee compensation figure. The new sub-boxes break out the tip and overtime components so recipients can claim the corresponding deductions on their personal returns.
New Box 1b: Cash Tips
Box 1b reports the total amount of cash tips, which includes tips received in cash or charged to credit or debit cards. This amount feeds into the new Schedule 1-A (Form 1040), where recipients calculate their qualified tip deduction in Part II.
New Box 1c: Treasury Tipped Occupation Code (TTOC)
Box 1c holds up to two Treasury Tipped Occupation Codes that identify the recipient’s tipped occupation(s). These codes are used on Schedule 1-A to determine whether tips qualify for the deduction.
Important: If the occupation code 000 appears in Box 1c and no other code is listed, the recipient’s cash tips are not qualified tips. The recipient should not use the Box 1b amount for the qualified tip deduction.
New Box 1d: Overtime Compensation
Box 1d reports the total amount of overtime compensation paid. Like tips, this amount is already included in Box 1a. Recipients use the Box 1d amount on Part III of Schedule 1-A (Form 1040) to calculate their qualified overtime compensation deduction.
New Box 3: Excess Golden Parachute Payments
Box 3 is completely new to the 1099-NEC. It reports excess golden parachute payments subject to a 20% excise tax. This field was previously reported on Form 1099-MISC (old Box 13 on that form). The IRS has moved it here because these payments are a form of compensation that aligns better with the 1099-NEC’s purpose.
Boxes That Did Not Change
The following boxes remain the same as the current version:
- Box 2: Payer made direct sales totaling $5,000 or more of consumer products to recipient for resale (checkbox)
- Box 4: Federal income tax withheld
- Boxes 5-7: State tax withheld, State/Payer’s state number, and State income
The $600 reporting threshold for nonemployee compensation also remains unchanged.
Side-by-Side Comparison: 2025 vs. 2026
| Box | Current Form (TY 2024/2025) | Draft Form (TY 2026) |
|---|---|---|
| 1 | Nonemployee compensation | 1a Nonemployee compensation (total) |
| — | Did not exist | 1b Cash tips (included in 1a) |
| — | Did not exist | 1c TTOC (occupation code) |
| — | Did not exist | 1d Overtime compensation (included in 1a) |
| 2 | Direct sales $5,000+ (checkbox) | Direct sales $5,000+ (checkbox) — unchanged |
| 3 | Not used | Excess golden parachute payments (moved from 1099-MISC) |
| 4 | Federal income tax withheld | Federal income tax withheld — unchanged |
| 5-7 | State reporting | State reporting — unchanged |
Who Needs to Use the New Tip and Overtime Boxes?
Many 1099-NEC filers will not need to populate boxes 1b, 1c, or 1d. These boxes are designed for specific situations where nonemployees receive tip or overtime income. Most businesses that pay standard contractor fees to consultants, freelance developers, or other service providers will only fill in Box 1a, just as they do today.
The new boxes are most relevant to:
- Gig economy platforms — Rideshare, food delivery, and similar platforms that report nonemployee compensation where the worker also receives tips through the platform
- Hospitality and service businesses — Hotels, restaurants, or event venues paying nonemployee workers (such as contract bartenders or caterers) who receive tips
- Any payer reporting nonemployee overtime — Though less common than for W-2 employees, certain nonemployee arrangements include overtime-structured payments that qualify under the new deduction
If none of your 1099-NEC recipients receive tips or overtime-eligible pay, boxes 1b through 1d will remain blank on your filings. However, you should still confirm with your e-filing provider that their software supports the updated box layout, since Box 1 becoming Box 1a affects all filers.
How Does This Relate to the 1099-MISC?
The 1099-MISC received parallel changes. New boxes for cash tips (13a), TTOC (13b), and overtime (14) were also added to that form, and the excess golden parachute payments box was removed (since it moved here to the 1099-NEC). The 1099-MISC also had several boxes renumbered as a result. If you file both form types, read our full companion article on 1099-MISC changes for 2026.
For a refresher on the differences between these two forms, see 1099-NEC vs. 1099-MISC: What’s the Difference?
What Filers Need to Do Now
This is a draft form — do not file it yet. The IRS will release the final version after OMB approval, likely later in 2026. However, there are steps you should take now to prepare:
1. Update Your Payroll and Accounting Systems
Your systems need to track and categorize three new data points for each 1099-NEC recipient:
- Cash tip amounts
- Treasury Tipped Occupation Code(s)
- Overtime compensation amounts
If you use e-filing software, check with your provider about their timeline for supporting the new fields. Even if you do not expect to use the tip/overtime boxes, the structural change from Box 1 to Box 1a means import templates and data mappings will likely need updating.
2. Identify Affected Workers
Determine which of your nonemployee workers, if any, receive tips or overtime-eligible compensation. You will need processes to collect this information accurately throughout the year. For gig and platform businesses, this may involve changes to how payment data is categorized at the transaction level.
3. Understand the TTOC System
The Treasury Tipped Occupation Codes are entirely new. The IRS will publish the complete list of valid codes in the final instructions. Watch for those to understand which codes apply to your workers’ occupations. Using the wrong code — or the 000 code — directly affects whether the worker can claim the tip deduction.
4. Watch for the Final Form and Instructions
The draft may change before the final release. Subscribe to IRS updates at IRS.gov/Form1099NEC to be notified when the final version is available.
Filing Deadlines
The 1099-NEC filing deadline remains January 31 — there is no change to the due date. For tax year 2026, that means:
- January 31, 2027: Deadline to file with the IRS and furnish Copy B to recipients
This is one of the earliest information return deadlines, so early preparation is essential — especially with the added complexity of the new boxes.
Official IRS Resources
- Draft Form 1099-NEC (Rev. December 2026) [PDF]
- About Form 1099-NEC — IRS.gov
- All IRS Draft Forms
- General Instructions for Certain Information Returns
Bottom Line
The 2026 Form 1099-NEC is getting its first structural overhaul since the form was reintroduced. The new tip, TTOC, and overtime boxes reflect the No Tax on Tips and No Tax on Overtime provisions now written into law, while the new Box 3 consolidates golden parachute reporting onto the compensation-focused form where it belongs.
For many filers, the practical impact is narrow: most of the new boxes will stay empty. But the Box 1 to Box 1a rename, updated import layouts, and new e-filing specifications will touch every 1099-NEC filing. Start preparing now — update systems, check with your e-filing provider, and monitor the IRS for the final form.
BoomTax makes it easy to e-file 1099-NEC forms with the IRS and state agencies. When the 2026 form is finalized, BoomTax will fully support the new boxes for tips, overtime, and golden parachute payments. Get started at BoomTax.com.
BoomTax, The Boom Post, and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors prior to engaging in any transaction.
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