These payments were formerly reported on Form 1099-MISC through 2019, but they must now be reported on Form 1099-NEC (sample below).
Who Uses Form 1099-NEC?
You must file a Form 1099-NEC form for non-employee compensation if all four of these conditions are met:
Payment was made to someone who is not your employeePayment was made for services in the course of your trade or businessPayment was made to an individual, partnership, estate, or corporationPayment made to the payee was at least $600 or more for the year
Don’t use Form 1099-NEC to report payments to a corporation, including a limited liability company (LLC) filing a tax return as a corporation or an S corporation. Some examples of payments you must report on Form 1099-NEC include:
Professional service fees to attorneys (including law firms established as corporations), accountants, architects, etc.Fees paid by one professional to another (fee-splitting, for example)Payments for services including payment for parts or materials used to perform the services if they were incidental to the serviceCommissions paid to non-employee salespeople not repaid during the year
You must also file Form 1099-NEC for anyone from whom you withheld federal income tax under backup withholding rules for any amount, even if it’s less than $600. Form 1099-NEC is also used to report sales of consumer products totaling $5,000 or more, for resale, on a buy-sell, a deposit commission, or other basis. This income should be reported on the recipient’s small business tax return.
Due Date for Form 1099-NEC
Form 1099-NEC must be given to each payee and filed with the IRS by January 31 of the year after the tax year being reported. For example, Form 1099-NEC for 2022 must be submitted by January 31, 2023. If January 31 is a weekend or holiday, the form is due the next business day.
Backup Withholding and Form 1099-NEC
Non-employees don’t have withholding taken from their payments, but there is one exception for backup withholding. Backup withholding is usually required by the IRS if a taxpayer fails to provide a correct taxpayer ID number on their W-9 form at hire. In this case, the IRS sends a backup withholding order to the payer requiring that they withhold federal income taxes from the payee at 24%. This withholding order stays in effect until it’s removed by the IRS.
Where To Get a Form 1099-NEC
Here are some ways to get 1099-NEC forms:
Using business tax preparation software Directly from the IRS From your business accounting program From an accountant or CPA who prepares business taxes
You can’t download the form from the internet because Copy A is printed in a special type of red ink that must be scannable.
What To Do if You Don’t Receive Form 1099-NEC
If you were paid $600 or more from any payee as a non-employee during the year, you must file Form 1099-NEC with the IRS as part of your tax return. If you had non-employee income and haven’t received your form by the end of January, contact the payee directly to request it.
How To Fill Out and Read Form 1099-NEC
There are five key parts to Form 1099-NEC:
Payer’s informationRecipient’s informationNon-employee compensation amountFederal income tax withheldState information
Information about the payer and payee information includes their name, address, and taxpayer ID. Box 1: Reports the total amount of non-employee compensation paid during the year. Box 2: Must be checked if you sold $5,000 or more for resale or other purposes. The total amount isn’t reported on this form, but it’s included on your small business tax return (usually Schedule C). Box 4: Reports any federal income tax withheld from a backup withholding notice. Boxes 5-7: Shows any state tax withheld, and the total state income to the non-employee for the year.
How To File Form 1099-NEC
The 1099-NEC forms must be filed with the IRS before January 31 using either paper or electronic filing. If you are filing paper returns, print them and send them to the IRS at the address depending on your state. You may also file electronically, using the IRS Filing Information Returns (FIRE) system. If you are filing 250 or more 1099-NEC forms, you can’t send paper forms; you must file electronically.
