If you have paid any non-employees, including independent contractors, freelancers, and other service providers, you must report the total of these payments for the year on IRS Form 1099-NEC.
This article gives information on Form 1099-NEC, including due date, how to complete the form, and how to file it with the Internal Revenue Service (IRS).
- Use Form 1099-NEC to report total payments to non-employees if you paid them $600 or more during the year.
- Give these forms to payees and report them to the IRS by January 31 of the year following the tax year being reported.
- Tax withholding isn't usual for non-employees, but you may need to report backup withholding.
- Don't use Form 1099-MISC to report payments to non-employees.
What Is Form 1099-NEC?
Form 1099-NEC is an Internal Revenue Service (IRS) information form, used to report payments to non-employees each year. You must file this report with the IRS if you paid $600 to a freelancer, independent contractor, or other individual or business who provided services to your company during the year. The form also includes information on federal and state income taxes withheld from payees.
You don't have to withhold federal or state taxes from payments to non-employees unless they are subject to backup withholding rules. This isn't a usual case, and you would receive a notice if you were required to withhold from payments to a specific individual.
Who Should Receive Form 1099-NEC?
NEC stands for "non-employee compensation," and non-employees are individuals who performed services for you during the year. It includes parts and materials you paid for a non-employee, like an independent contractor who repaired your computer. The 1099-NEC is also used for payments for attorney fees for their services, but not for gross proceeds to an attorney as part of a settlement.
Form 1099-NEC is not used for employee wages and salaries. Use Form W-2 to report these payments. Check with your tax professional if you have any doubts about whether someone is an employee or a non-employee, or file Form SS-8 to ask the IRS to make the determination for you.
Don't use Form 1099-MISC to report payments to non-employees. This form is used to report other types of payments, including rents, prizes and awards, fishing boat proceeds, and medical and health care payments.
When Is Form 1099-NEC Due?
Form 1099-NEC must be filed with the IRS by January 31 for the previous calendar year. This deadline is the same for both paper filing and e-filing. The exact date may change for a year to the next business day if January 31 falls on a weekend or holiday.
You may be subject to late filing penalties if you submit 1099-NEC forms after the due dates. The amount of the penalty is determined by how late you file and the size of your business.
Using a payroll service provider to prepare and file your 1099-NEC forms doesn't relieve you of the responsibility to ensure that the forms are filed correctly and on time.
Where To Get Form 1099-NEC
You can get 1099-NEC forms from office supply stores, directly from the IRS, from your accountant, or using business tax software programs. You can't use a template 1099-NEC form that you find on the internet because the red ink on Copy A is special and can't be copied. You must use the official form.
Before You File Form 1099-NEC
Before you prepare Form 1099-NEC, you will need a valid tax ID number for each non-employee. When you hire a non-employee, you must get a W-9 form from them reporting this and other identifying information you'll need to complete Form 1099-NEC.
Double-check the taxpayer ID numbers provided to you by non-employees to avoid issues with the IRS or state tax agencies. The IRS provides an Online Taxpayer ID Matching program to help you ensure that the numbers are correct.
How To Complete Form 1099-NEC
You'll have to include information about your business for each 1099-NEC you prepare, including:
- Your federal employer ID number
- Your business name
- Your business address
Enter the recipient's taxpayer ID number (Social Security number, employer ID number, or federal tax ID number) along with your business information in the boxes provided on the left side of the page. Each is clearly marked as to what you should enter there.
Next, enter information regarding the payments you've made to the non-employee in the appropriate box:
- Box 1: This amount is the total you paid to the payee during the tax year.
- Box 4: Enter the total backup withholding you have taken from this person's payments during the year. Most non-employees aren't required to have withholding unless they are subject to backup withholding. You would receive a notice from the IRS or a court if you were required to withholding taxes from payments to an individual.
- Boxes 5, 6, and 7: The IRS doesn't require that you fill in these boxes, but your state's department of taxation might require a copy of the Form 1099-NEC with this information. Enter the person's state income, any state taxes you might have withheld, and identify the state or states to which you'll be reporting. Complete an additional 1099-NEC for this information if you must enter data for more than two states because the form only accommodates two.
How To Correct a 1099-NEC
Check for errors before you submit the forms to the IRS. Common errors in completing 1099 forms include using the form for the wrong year, sending the form to the wrong person or company, and failing to include all requested information.
You can simply correct the error if you make a mistake in completing a 1099-NEC form and if you discover it before you submit the form to the IRS. Otherwise, you must submit a corrected 1099-NEC form. Check the "corrected" box at the top of the new form and be sure to change Form 1096 if the correction affects your totals on this transmittal form.
Frequently Asked Questions (FAQs)
When must you file a 1099-NEC?
If you hire contract workers, freelancers, and other service providers for business purposes, you must file a 1099-NEC form. You must file this form if you have paid someone $600 or more during the year. Use this form to report fees paid to professionals like attorneys, accountants, or consultants, but not gross payments made to attorneys as part of a settlement.
How do you file a 1099-NEC electronically?
To e-file 1099 information forms, including Form 1099-NEC, use the IRS's Filing Information Returns Electronically (FIRE) system. You must first apply for a Transmitter Control Code (TCC) to use the FIRE system. You must file electronically if you have 250 or more 1099-NEC forms to file.
Where do you mail a 1099-NEC?
You may be able to mail your 1099-NEC forms to the IRS if you have fewer than 250 of these forms to file. You can also use an IRS-approved private delivery service. The mailing address depends on where your business is located. The IRS General Instructions for Certain Information Forms publication (page 7) has a list of addresses for each state.