Form 1099-NEC reports nonemployee compensation of more than $600 in a calendar year via check, bank, or money transfer, cash app, etc. If you paid a contractor via credit card, you do not need to file a 1099.
If you paid a contractor via credit card, you do not need to file a 1099-NEC because contractors that are paid through credit card companies will receive a gross income report from the credit card processor through a 1099-K.
Additionally, S corporations and non-profit organizations do not receive a 1099-NEC.
How does the IRS use 1099-NECs?
The IRS will total reported revenue on all the 1099 forms received under a taxpayer/business' Tax Identification Number. It's a way for the IRS to get a general idea of how much money a person should report on their tax returns.
You should file 1099-NECs to report the amount of money you paid to contractors during the tax year.
When is Form 1099-NEC due?
The IRS filing deadline for 1099-NECs is February 2nd. The IRS still accepts 1099s after this deadline; we strongly encourage you to file them. If you do not file in time, an information return penalty may apply; see Information Return Penalties. The sooner you file, the less you’ll pay in late-filing penalty fees.
How to file Form 1099-NEC
There are several options available for filing Form 1099-NEC.
- If you use a payroll provider to issue payments to your nonemployee/contractors, you may be able to file directly through that platform.
- Use an e-filing service such as Avalara
- IRS E-filing option, Information Returns Intake System (IRIS), which also lets you file and make corrections for Forms 1099. To do so, you need an IRIS Transmitter Control Code (TCC).
How to complete Form 1099-NEC
- Box 1: Nonemployee compensation: Enter the total amount paid to the contractor during the year
- Payer’s TIN: Enter your business taxpayer identification number (TIN).
- Payer’s Information: Enter your business’s name and address in the top left section of the form.
- Recipient’s TIN: Enter the independent contractor’s TIN from their W-9.
- Recipient’s name: Enter the independent contractor’s name from their W-9.
- Street address: Enter the independent contractor’s address from their W-9.
- Box 4: Federal income tax withheld: Record any federal and state income tax withholdings, if applicable.
What if I received a 1099-NEC?
If you receive a 1099-NEC, it means that someone else contracted with you during the tax year and paid you for your services. You should upload the 1099-NEC (and any 1099 and other tax documents received) to the Annual Tax Questionnaire.