1099-NECs are for non-employee compensation above $600 during the entire year paid for via check, bank/money transfer, cash app, etc.
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, corporations (either C or S) and non-profit organizations do not need to 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 have a general idea of how much money a person should be reporting on their tax returns.
You should file 1099-NECs to report the amount of money you paid to contractors during the tax year.
What if I received a 1099-NEC?
If you receive a 1099-NEC, it's because someone else contracted you during the tax year and paid you money. You should upload the 1099-NEC (and any 1099 and other tax documents received) to the Tax-Related Documents section. You can access this by going to Your Business > Documents > Tax-Related Documents and uploading it with the "[Current Tax Year] Tax Document" tag. We will use this during tax return preparation.
Here are the official forms and instructions for reference:
Filing a 1099-NEC
The online option we suggest is Track1099 because it is fast, the most affordable price and accessible.
How to fill the form(s) out:
- Enter your business' name, address and Tax Identification Number in the Payer's boxes.
- Using the contractor's W-9, enter the name, address and Tax Identification Number in the Recipient boxes.
- Enter the total amount paid to the contractor during the year in either Box 1 or Box 10.
- E-file the 1099.
- Once filed, submit "Copy B for Recipient" to the contractor.