1099-NEC Filing & Instructions

As a business owner paying independent contractors, you must furnish Form 1099-NEC to any contractor you paid over $600 for services in a calendar year by January 31st, detailing their name, address, taxpayer ID, and compensation amount; you must also file copies with the IRS by 2/28 (mail) or 3/31 (electronically) to report these payments for your tax records. Tracking contractor payments throughout the year will make completing these required 1099-NEC forms easier. See the list of Who gets a 1099-NEC

How to file 1099-NEC form?

Here are the key steps to file a 1099-NEC form:

  1. Gather information on W-9
    You will need the recipient’s name, address, taxpayer ID number (EIN or SSN), and the total amount paid to them over the calendar year.
  2. Fill out Form 1099-NEC
    Order official IRS 1099-NEC forms and/or tax software to complete it with the required information. Read the filing instructions here
  3. Fill out Form 1096
    This is the transmittal form that accompanies the 1099-NEC forms. It summarizes how many 1099-NEC forms are enclosed. If you choose to e-file, we automatically complete your 1096 form.
  4. Print and mail forms
    Order 1099-NEC stock forms and software. Mail 1 copy to the IRS and 1 copy to the recipient by January 31st. Use Form 1096 as a cover page if mailing multiple 1099s.
  5. E-file
    Rather than printing and mailing 1099-NEC, the forms can be filed online through TaxFormExpress or through tax software. Recipients must still receive a copy.
  6. Keep records
    Retain copies of 1099-NEC and 1096 forms for at least 4 years for tax purposes.

The main things to remember are meeting the deadlines, reporting complete and accurate information, providing copies to recipients, and retaining records. This ensures proper tax reporting of payments.

1099-NEC Filing Instructions

The 1099-NEC form has the following main boxes that must be filled out:

  • Payer’s name, address, federal identification number – This goes in the “From” section and identifies the business providing the 1099-NEC.
  • Recipient’s name, address, federal identification number – This goes in the “To” section and identifies the contractor or vendor receiving the 1099-NEC.
  • Box 1 – Nonemployee compensation. This is the total gross amount paid to the recipient in the calendar year.
  • Box 2 – Federal income tax withheld (if any). This is for backup withholding.
  • Box 3 – Check this box if the payment is being reported by a third-party.
  • Box 4 – Federal income tax withheld by third party.
  • Box 5 – State tax withheld (optional field).
  • Box 6 – State/Payer’s state number (optional).
  • Box 7 – State income. Total paid to recipient subject to state tax.

The key required boxes are 1, 2, 3, and 7. The others are optional based on local tax requirements. The form also contains instructions on the back.

1099-NEC Form Layout
1099-NEC Recipient Copy B

Who gets the 1099-NEC form?

A 1099-NEC must be provided to individuals or unincorporated businesses who were paid for services but are not considered employees. Common recipients include:

  • Independent Contractors
  • Freelancers
  • Self-Employed Consultants
  • Service Providers like Repairmen, Landscapers, Cleaners, etc.
  • Attorneys – for legal fees over $600
  • Landlords – for rent paid to an individual over $600

Basically, if you paid someone who is not your employee over $600 for services, you need to report it on a 1099-NEC. This helps the IRS match income received to tax returns to prevent underreporting.

Key Exceptions:

You do not need to issue a 1099-NEC to corporations or LLCs. Payments over $600 to incorporated service providers are reported on a 1099-MISC instead. Salaries to employees also do not require a 1099-NEC.

1099-NEC Multi-Part Form Copies Descriptions

The 1099-NEC has several copies that are used for reporting and record keeping:

  • Copy A – This copy is filed with the IRS along with Form 1096 by the February 28th deadline. It is imprinted with special red ink for automated processing.
  • Copy 1 – This copy goes to the state tax department if required. Due dates vary by state.
  • Copy B – This copy is for the recipient’s records. It must be provided to them by January 31st.
  • Copy 2 – This copy is for the payer’s records and should be retained for at least 4 years.
  • Copy C – This is an optional copy some companies provide for the recipient’s state tax returns if needed.
  • Copy D – This is an optional copy some companies use for their own accounting records.

So in summary:

  • Copy A goes to the IRS with Form 1096.
  • Copy B must go to the recipient.
  • Copy 2 is retained by the payer.
  • Other copies are optional for state filing needs.

Properly distributing the copies ensures the income is reported correctly to both federal and state tax authorities. If you need help filing your 1099-NEC, try our simple e-file solution.

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