Table of Contents
Table of Contents
What Is a 1099-NEC Form?
A 1099-NEC form is used to report non-employee compensation. Businesses must complete a 1099-NEC form to inform the IRS of any compensation paid throughout the year to an individual who was not a direct employee of the company. Examples include freelancers, gig workers, contractors, consultants, etc. Reporting compensation from the previous year is due by January 31.
Who Gets a 1099-NEC Form?
The 1099-NEC is required for each US-based non-employee who meets all of the following qualifications.
Earned at Least $600
If a non-employee earned $599 or less throughout the year, a 1099-NEC form is not required.
Not Your Employee
Because employees complete a W-2 for their tax information, a 1099-NEC is only required for non-employees.
Paid for Business Services
Throughout the year, the non-employee was paid $600 or more for services such as training courses, janitorial services, labor, or payments of legal fees to an attorney.
Individual, Partnership, or Estate
The non-employee doesn’t have to be an individual contractor. A partnership or estate who has provided services for more than $600 throughout the year must also receive a 1099-NEC form.
How to File a 1099-NEC Form
The 1099-NEC form can be filed online or by mail. It can be downloaded or completed as a fillable PDF on the IRS website. The deadline to file with the IRS and send the form to the non-employee is January 31.
Step 1: Download or Complete Using IRS Free File
The form can be downloaded to your computer or completed using a fillable online PDF format using IRS Free File at IRS.gov.
Step 2: Information needed
To complete the form, you will need the non-employee’s total compensation earned over the year. Remember, it must be more than $600. This compensation amount includes fees, commissions, and prizes for services performed.
You will also need your TIN (Tax Identification Number), the individual’s TIN, the individual’s name and address, and the amount of any taxes withheld.
Step 3: Provide to Payee
Once you’ve completed and filed the form, send the form to the non-employee.
Questions You’ve Asked Us About 1099-NEC Forms
When is the 1099-NEC form due to the IRS?
Employers must supply the complete 1099-NEC form to the payee and file with the IRS by January 31.
Where can I find a 1099-NEC form?
The 1099-NEC form can be found on the IRS website at https://www.irs.gov/forms-pubs/about-form-1099-nec.
What is the difference between 1099-MISC and 1099-NEC?
The 1099-NEC is a new form created by the IRS rolled out in 2020. It’s used to report non-employee compensation. The 1099-MISC form was used prior to 2020 for non-employee compensation. Now the 1099-MISC (https://www.irs.gov/forms-pubs/about-form-1099-misc) is used for reporting miscellaneous information, such as payments of at least $10 in royalties or broker payments or at least $600 in rents, prizes, medical care payments, or payments to an attorney. The 1099-MISC is no longer used for services performed.
What happens if a 1099-NEC form isn’t filed?
If the 1099-NEC isn’t filed by January 31, there is a $50 filing penalty per form if you file within 30 days of the due date. If you file after 30 days but before August 1 of that year, the penalty is $110 per form.
Alaura is an espresso-addicted HR professional who loves improving processes and providing the best experience to employees. She focuses on performance management, compensation best practice, and leadership coaching and strategy. When not working, she loves playing video games and making sourdough bread.