An Employer’s Guide to Form 1099-NEC
This article was last edited on 9/8/2020. For updated information on Form 1099-NEC, visit https://www.irs.gov/forms-pubs/about-form-1099-nec.
Beginning in tax year 2020, you will need to file Form 1099-NEC to report any nonemployee compensation you paid during the year. Before 2020, you would have used Box 7 on Form 1099-MISC to report these amounts.
At a glance:
- Why is there a new form?
- What is nonemployee compensation?
- Who needs to file Form 1099-NEC?
- What information is needed for Form 1099-NEC?
- How can I collect the info I need for the form?
- When is the form due?
- Who receives a copy?
- Do I still need to file Form 1099-MISC?
Why is there a new form?
Form 1099-NEC is not technically a new form, but it hasn’t been used since tax year 1982. It’s part of a series of information returns used to report any income a person receives besides wages, salaries, and tips (reported on Form W-2).
The IRS brought Form 1099-NEC back to alleviate confusion about filing deadlines for 1099-MISC. Previously, a Form 1099-MISC with an amount in Box 7 (Nonemployee Compensation) was due to the IRS and recipient by January 31 of each year. 1099-MISC with an amount in any other box was not due to the IRS until February 28 (filed by paper) or March 31 (filed electronically).
What is nonemployee compensation?
Nonemployee compensation is money paid to an independent contractor for work they do for your company. It includes fees, commissions, prizes, and awards for their services.
It does not include:
- most payments made to corporations
- payments for merchandise, phones, freight, storage, etc.
- rent payments made to real estate agents or property managers
- payments made to tax-exempt organizations
Unlike wages and salaries paid to employees, you do not typically withhold taxes from nonemployee compensation.
Who needs to file Form 1099-NEC?
You need to file the form if you paid someone at least $600 during the course of doing business for any of the following reasons:
- services performed by someone who is not your employee
- cash payments for fish or other aquatic life
- payments made to an attorney
If you withheld federal taxes under backup withholding rules, you’ll need to file a 1099-NEC form – regardless of how much you paid the person during the year.
What information is needed for Form 1099-NEC?
Form 1099-NEC is a short return, so you don’t need much info. You will need:
- payer’s name, address, and taxpayer identification number (Social Security Number, Employer Identification Number, etc.)
- recipient’s name, address, and taxpayer identification number
- nonemployee compensation amount paid in the past tax year
- any federal income tax withheld
- any state taxes withheld if you’re required to file a copy of the form with your state and/or participate in the Combined Federal/State Filing Program
Read also: Do I have to send 1099 forms to my state?
How can I collect the info I need for the form?
The easiest way to ask your independent contractors and other nonemployees for the required information is to ask them to fill out Form W-9. Between that form and your own payment and accounting data, you will have everything you need to complete Form 1099-NEC.
When is the form due?
Form 1099-NEC is due to the recipient and the IRS by January 31 of each year. If January 31 falls on a weekend or holiday, it’s due the following business day.
Who receives a copy?
Like other 1099 forms, Form 1099-NEC has multiple copies:
- Copy A goes to the IRS
- send Copy 1 to the state tax department, if necessary
- give Copies B and 2 to the recipient
- keep Copy C for your company’s tax records
Do I still need to file Form 1099-MISC?
You may still need to file Form 1099-MISC if you paid anyone at least $10 in royalties or at least $600 in
- prizes and awards
- other income payments
- cash paid to an individual, partnership, or estate from a notional principal contract (NPC)
- fishing boat proceeds
- medical and healthcare payments
- crop insurance proceeds paid to farmers by an insurance company
- Section 409A deferrals
- nonqualified deferred compensation
If you typically file Form 1099-MISC for any of the payments listed above, pay extra attention this year because the boxes have been rearranged due to Form 1099-NEC.