IRS Form 1099-NEC is used by businesses to report payments made to nonemployees, such as independent contractors, freelancers, and other service providers who are not on the payroll. Introduced in tax year 2020, this form was brought back to specifically address and simplify the reporting of nonemployee compensation, separating it from the 1099-MISC forms used in previous years.
Form 1099-NEC must be filed for each person to whom you have paid at least $600 during the year in the course of your business for services rendered. This includes payments to individuals, partnerships, estates, or, in some cases, corporations. Payments could be for services including parts and materials, prizes and awards for services provided, and other income payments.
The IRS requires that Form 1099-NEC be filed on or before January 31st of the year following the payment. For example, payments made during 2023 must be reported by January 31, 2024. It is critical to adhere to this deadline to avoid potential penalties for late submission.
Filing Form 1099-NEC can be done either electronically or on paper. However, if you are required to file 250 or more forms, the IRS mandates electronic filing. Here are the steps to properly file this form:
