What Is Form 1099-NEC and Who Needs to File It?

Form 1099-NEC is an information return used by businesses to report payments made to individuals who are not on their payroll. Its purpose is to document nonemployee compensation, which includes payments to independent contractors, freelancers, or other self-employed individuals for services rendered. This form was reintroduced by the IRS to separate the reporting of nonemployee compensation from other miscellaneous payments, a function previously handled by Form 1099-MISC.

Who Must File Form 1099-NEC

A business is required to file Form 1099-NEC when it has paid $600 or more to a nonemployee for services during a calendar year. This threshold applies to the total payments made during the year, not a single transaction. The requirement is triggered by payments for services performed for a trade or business, which can include fees, commissions, benefits, or awards. This rule applies strictly to payments for services, not for the purchase of goods or merchandise.

The filing obligation extends to payments made to individuals, partnerships, and most types of limited liability companies (LLCs). Businesses are not required to issue a Form 1099-NEC for payments made to C Corporations or S Corporations. An exception applies to payments for legal services. A business must issue a Form 1099-NEC if it pays $600 or more to an attorney or law firm for legal services, even if the firm is incorporated. A form is also required, regardless of the amount, when a business has withheld any federal income tax from the nonemployee’s compensation.

Information and Completion of Form 1099-NEC

To complete a Form 1099-NEC, a business must first collect information from the service provider using Form W-9, “Request for Taxpayer Identification Number and Certification.” This form is used to gather the recipient’s legal name, business name if different, mailing address, and their Taxpayer Identification Number (TIN). A TIN is a Social Security Number (SSN) for an individual or an Employer Identification Number (EIN) for a business entity.

When filling out the Form 1099-NEC, the payer uses the information from the Form W-9 to complete the recipient’s details. Box 1, “Nonemployee compensation,” is where the total amount paid for services during the year is entered. This figure should represent the gross amount paid before any expenses or deductions the recipient might claim.

Box 4, “Federal income tax withheld,” is used if the recipient was subject to backup withholding, a situation that can arise if they failed to provide a correct TIN. In such cases, the payer is required to withhold tax. Businesses must use the official, scannable versions of Form 1099-NEC provided by the IRS or an authorized vendor. Copies printed from the IRS website are for informational purposes only and cannot be filed with the government.

Filing Deadlines and Submission Process

A copy of the Form 1099-NEC, known as Copy B, must be furnished to the recipient by January 31 of the year following the payment year. The same deadline, January 31, applies to filing Copy A of the form with the IRS.

Businesses can submit these forms by mail or electronically. For paper filing, businesses mail the physical, scannable Copy A forms and must also include Form 1096, “Annual Summary and Transmittal of U.S. Information Returns.” This form summarizes the total number of forms being sent and the amounts reported.

Electronic filing is required for businesses that file a total of 10 or more information returns in a calendar year. This threshold is an aggregate, meaning it is based on the combined total of forms filed, such as Forms W-2, 1099-NEC, and 1099-MISC.

Guidance for Form 1099-NEC Recipients

Recipients should review the form to verify that the personal information is correct and that the amount reported in Box 1 matches their own records. Any discrepancies should be addressed with the payer immediately to request a corrected form if necessary. This income is considered self-employment income and must be reported on your personal tax return.

For sole proprietors and single-member LLCs, this income is reported on Schedule C, “Profit or Loss from Business,” which is filed with Form 1040. On Schedule C, you will list the gross income shown on your 1099-NEC forms, along with any other business income. You can then deduct ordinary and necessary business expenses, such as supplies or vehicle mileage, to determine your net profit or loss.

You must report all income shown on your 1099-NEC forms, as the IRS receives a copy and uses automated systems to match this information with the income reported on your tax return. Failing to report this income can lead to an IRS inquiry, a tax bill, and potential penalties. If your total net earnings from self-employment are $400 or more, you will also need to calculate and pay self-employment taxes using Schedule SE, “Self-Employment Tax.”