If you hire contractors, freelancers, vendors, or other non-employees, you may need to file Form 1099-NEC. This form reports nonemployee compensation of $600 or more and must be filed accurately and on time to avoid IRS penalties.

This guide provides step-by-step instructions for filing Form 1099-NEC correctly.

What is Form 1099-NEC

Form 1099-NEC reports payments of $600 or more made to non-employees for services. This includes:

  • Freelancers
  • Independent contractors
  • Gig economy workers
  • Professional service providers
  • Attorneys and legal services

If you paid a contractor $600 or more, you must file Form 1099-NEC with the IRS and send a copy to the payee.

Step 1. Collect a Valid W-9 From Each Contractor

Before issuing any payment, request a completed Form W-9. This provides:

  • Legal name
  • Business name if applicable
  • Address
  • Taxpayer Identification Number
  • Federal tax classification

Best practices

  • Require a W-9 before onboarding
  • Confirm the form is signed and dated
  • Run TIN matching to verify accuracy
  • Store forms electronically to preserve audit trails

A complete and accurate W-9 prevents the most common IRS errors.  Learn more about W-9 best practices on our blog.

Step 2. Track Payments and Understand When 1099-NEC or 1099-K Applies

Tracking payments correctly ensures you report the right amounts on the right form.

When payments are 1099-NEC reportable

You must file Form 1099-NEC when:

  • You paid $600 or more
  • You paid the contractor directly
  • The payment was for services

Direct payment methods include:

  • Check
  • ACH
  • Cash
  • Direct deposit
  • Business apps that do not act as third-party settlement organizations
  • These payments belong on Form 1099-NEC.

When payments become 1099-K reportable

Due to legislative changes, including the One Big Beautiful Bill, the IRS reverted back to the original Form 1099-K rules. A TPSO must issue Form 1099-K only when all the following are true:

  1. The contractor receives more than $20,000
  2. The contractor completes 200 or more transactions
  3. Payments are processed through a third-party settlement organization such as PayPal, Venmo business, Square, Stripe, Etsy, Uber, DoorDash, or similar platforms

If both thresholds and TPSO criteria are met, the platform, not you, files Form 1099-K.

Mixed payment methods: If you paid the contractor directly and through a TPSO:

  • You report only direct payments on Form 1099-NEC
  • The TPSO reports eligible payments on Form 1099-K

Step 3. Complete Form 1099-NEC

To prepare the form, you will enter:

Payer Information

  • Name
  • Address
  • Taxpayer Identification Number

Recipient Information

  • Name
  • Address
  • Taxpayer identification number (TIN)

Box 1. Nonemployee Compensation: Report the total amount you paid directly for services.

Box 4. Federal Income Tax Withheld: Enter only if backup withholding is required.

State Reporting Information: Complete if your state has additional filing requirements.

Step 4. Validate Your Data Before Filing

Data validation reduces IRS rejections and prevents costly mistakes.

Perform checks to confirm:

  • All required fields are complete
  • TIN and name formats are correct
  • TIN matching results are accurate
  • Boxes and amounts are logical
  • No negative numbers
  • Addresses follow USPS formatting
  • You are using the correct tax year

Filing without validation increases the risk of penalties and rejections.

Step 5. File Form 1099-NEC With the IRS

The IRS deadline to file Form 1099-NEC is January 31.

Electronic filing requirement: You must file electronically if you are filing 10 or more total information returns across all form types combined. This includes 1099s, W-2, 1098, 1042-S, and others.

Electronic filing provides:

  • Faster processing
  • Fewer errors
  • Validation checks
  • Easier corrections

FIRE vs. IRIS for eFiling

For tax year 2025 filings:

  • You may file through either FIRE or IRIS, depending on what your filing system supports
  • FIRE continues to accept information returns for this filing season

For tax year 2026 filings and beyond:

  • The IRS will require filers to submit information returns through IRIS
  • FIRE will no longer be available for filing 1099 forms once the transition is complete
  • Organizations should begin preparing now to ensure their vendors and systems support IRIS transmittal requirements

Paper filing rules: Paper filing is allowed only if you are filing fewer than 10 total information returns for the entire year. Paper filing is slower and more prone to errors, so e-filing is strongly recommended.

No automatic extension for Form 1099-NEC: Form 1099-NEC does not qualify for the automatic 30-day extension available for other 1099 forms. Extensions are granted only under IRS approved extenuating circumstances such as natural disasters or system failures.

Step 6. Deliver 1099-NEC Copies to Recipients

You must send Copy B to each contractor by January 31, the same date you file with the IRS.

Acceptable delivery options include:

  • Printed copies mailed to the contractor
  • Electronic delivery with recipient consent

Ensure:

  • Addresses are validated
  • Email delivery is secure
    You have a reprint process for lost statements
  • Missing the January 31 recipient deadline can cause compliance issues and delays for contractors.

Step 7. File Corrections if Needed

If you discover an error after filing:

  • Submit a corrected 1099-NEC as soon as possible
  • Provide updated copies to the contractor
  • Keep records of all corrections and notices

Correcting early helps avoid penalties and IRS notices.

Common Filing Mistakes to Avoid:

  • Avoid mistakes that frequently cause IRS rejections:
  • Invalid or missing TINs
  • Reporting amounts on the wrong form (NEC vs K)
  • Filing the wrong tax year
  • Missing or incomplete fields
  • Filing late
  • Incorrect payment classification

Penalties for incorrect filings in 2026 can reach $340 per return. Accuracy is essential.

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