What is Form 1099-NEC?
Form 1099-NEC is used to report nonemployee compensation — typically payments made to freelancers, independent contractors, and other non-W-2 workers. If your business paid an individual or unincorporated entity $600 or more during the tax year for services, you’re likely required to file a 1099-NEC.
Quick Tip: If you’re unsure whether someone should receive a 1099-NEC, ask yourself: Did I pay this person for services and not on payroll? If yes, a 1099-NEC may apply.
Who Needs to File a 1099-NEC?
Businesses, nonprofit organizations and even individuals who operate as sole proprietors must file Form 1099-NEC if they paid at least $600 in nonemployee compensation during the tax year. This includes:
- Freelance graphic design or writing work
- Consulting services
- Gig economy or platform-based labor
- Fees for professional services (legal, accounting, etc.)
Key Differences: 1099-NEC vs. 1099-MISC
Prior to 2020, businesses reported non-employee compensation in Box 7 of Form 1099-MISC. However, because the 1099-MISC had a later filing deadline for other types of income, the IRS often encountered late filings, confusion, and mismatches. To resolve these issues, the IRS reintroduced Form 1099-NEC in tax year 2020 to exclusively handle non-employee compensation with its own clear deadline (January 31).
This change helps streamline reporting and ensures the IRS receives compensation information in time to verify taxpayer income on personal returns.
What Belongs on 1099-NEC?
Form 1099-NEC is used strictly for non-employee compensation—payments for services performed by individuals who are not on your payroll. These include:
- Freelancers, independent contractors, gig workers (e.g., a designer you hired to revamp your website)
- Professional service providers (e.g., consultants, accountants, attorneys for legal services)
- Commission and fee-based workers (e.g., a sales representative paid per contract closed)
- Directors’ fees (e.g., compensation to members of a board of directors.
What’s Still Reported on 1099-MISC?
Although non-employee compensation moved to the NEC, Form 1099-MISC is still very much in use—for reporting miscellaneous income types including rent payments, royalties, prizes and awards and medical and health care payments.
How to Fill out and File Form 1099-NEC
Before you begin filling out the form, collect the following information for the recipient (independent contractor, freelancer, or vendor):
- Legal name (exactly as shown on their W-9)
- Address
- Taxpayer Identification Number (usually a Social Security Number or EIN)
Pro Tip: Use IRS TIN matching services ahead of time to ensure the TIN and name combination is valid—this helps reduce the chance of rejected forms.
You’ll be filling out Copy A (for the IRS) and Copy B (for the recipient). Here’s what to include:
| Field | What to Enter |
| Box 1 | Total nonemployee compensation paid ($600 or more) |
| Box 4 | Federal income tax withheld, if any (typically rare unless backup withholding applies) |
| Box 5–7 | State income tax withheld, state identification number, and amount of compensation for state filing (if applicable) |
Only complete Boxes 4–7 if your business withheld federal or state income taxes from the contractor’s payments—this is uncommon but may apply in certain situations like backup withholding.
Once completed, you’re then required to send the form to both the recipient and the IRS, and possibly your state tax department, depending on your reporting obligations.
It’s recommended to retain copies of each 1099-NEC form, the recipient’s W-9, and any proof of payment (e.g., invoices, bank records) for at least four years in case of audit.
| Field | What to Enter |
| Payer & Recipient Info | Name, address, and TIN of both parties |
IRS Filing Deadlines and Penalties for Form 1099-NEC
The IRS has a strict deadline for Form 1099-NEC. January 31 is the due date to submit Copy A to the IRS and furnish Copy B to the recipient.
This applies to both paper and electronic submissions. Unlike other forms (like the 1099-MISC), there is no extended deadline for electronic filing. The January 31 deadline is firm across the board.
Failure to file 1099-NEC forms by the deadline—or filing with errors—can lead to hefty penalties based on how long you delay the submission.
Pricing
IRS Filing Deadlines and Penalties for Form 1099-NEC
| Days Late | Penalty Per Form | Maximum Penalty (Small Business*) |
|---|---|---|
| 1–30 days | $60 | $220,500 per year |
| 31 days–Aug 1 | $120 | $630,500 per year |
| After Aug 1 or not filed | $310 | $1,261,000 per year |
| Intentional disregard | $630+ | No cap |
[*] A “small business” is defined by the IRS as one with gross receipts of $5 million or less for the past three years.
Common Questions About Form 1099-NEC
FAQ
Can I file a 1099-NEC electronically?
Yes, the IRS actually requires e-filing when submitting any more than 10 forms, and eFileMyForms makes the process simple and secure.
Do I need to send a 1099-NEC to corporations?
Generally, no. However, payments to attorneys and certain medical providers still require a 1099-NEC, even if they operate as a corporation.
Can I correct a mistake on Form 1099-NEC after filing?
Yes! If you notice an error, you must file a corrected 1099-NEC and re-submit it to both the recipient and the IRS.
Do I need to file a 1099-NEC with the state?
Some states require separate filings. Check out our direct state reporting guidance for more information