Master the 1099-NEC Form: From Basics to Filing Online

The ABCs of 1099-NEC Form

The 1099-NEC is an informational return that reports payments made to non-employees, such as independent contractors. In essence, it replaces box 7 on the previously used form 1099-MISC. You must file 1099-NEC for each person you've paid $600 or more during the tax year during your trade or business. The IRS uses this information to track contractors' income and ensure they're accurately reporting their earnings.

Cracking down on when to file the 1099-NEC

Knowing the tax deadlines is half the battle to stay compliant. So, when do you have to file a 1099-NEC? IRS says that you must file a Form 1099-NEC under the following circumstances:

Non-Employee Compensation: You paid someone who is not your employee $600 or more during the year for services rendered in the course of your trade or business. This includes payments to independent contractors, freelancers, and other non-employees.
Professional Fees: You paid $600 or more to attorneys, accountants, or other service providers, regardless of whether they are incorporated, for services performed in your business.
Prizes and Awards: You provided prizes and awards to non-employees as payment for their services, and the total value was $600 or more during the year.
Other Income Payments: This includes other forms of compensation for services performed for your trade or business by an individual who isn't your employee.
Payment for Services: Any payment made to non-employee individuals for services, in the course of your business, totaling $600 or more in the year requires reporting on Form 1099-NEC.
FATCA Reporting: If the payments are reportable under the Foreign Account Tax Compliance Act (FATCA), they must also be reported on Form 1099-NEC.

Filing Deadlines

January 31: Form 1099-NEC must be filed with the IRS and delivered to the recipients by January 31st of the year following the payment year. For instance, for payments made in 2023, the form should be filed and delivered by January 31, 2024.

Power of Technology: File 1099 NEC Online

The convenience of filing tax forms online has revolutionized the tax filing process. When you choose to e file 1099 NEC, you don’t only save time but also ensure secure data handling. Multiple IRS-approved online platforms provide these services, coupled with support teams ready to answer any questions that arise. Also, you may review information about filing Forms 1099 in California and the State of Oregon.

How to File 1099 NEC Online: A Simple Guide

Filling out the IRS Form 1099-NEC is an important task for reporting non-employee compensation. Here are the simplified steps on how to file 1099 NEC online:

Step 1: Gather Required Information

Before you start filling out the form, gather all necessary information:

Payer’s information: This includes your (the payer's) name, address, and Taxpayer Identification Number (TIN), which can be your Social Security Number (SSN) or Employer Identification Number (EIN).
Recipient’s information: You need the recipient's name, address, and TIN (SSN, EIN, or Individual Taxpayer Identification Number (ITIN)).

Step 2: Obtain the Form

Download the Form 1099-NEC from the IRS website or order physical copies. Note that the form must be the official IRS version as photocopies are not acceptable for filing with the IRS.

Step 3: Fill Out Payer’s Information

In the upper left box, fill in your:

Name
Street address (including room or suite no.)
City, state, and ZIP code
Telephone number

Step 4: Fill Out Recipient’s Information

In the left box under the payer’s information, enter the recipient’s:

Name
Street address (including apartment no.)
City, state, and ZIP code

Step 5: Input Taxpayer Identification Numbers

Payer’s TIN: Enter your TIN in the box provided on the top right.
Recipient’s TIN: Enter the recipient's TIN in the second box on the top right.

Step 6: Report Nonemployee Compensation

Enter the total amount of nonemployee compensation paid to the recipient in the calendar year in box 1. This includes fees, commissions, prizes, and awards for services performed by someone who is not your employee.

Step 7: Check the FATCA Filing Requirement Box

If you are subject to the Foreign Account Tax Compliance Act (FATCA) filing requirements, check the box in the top right corner.

Step 8: Account Number (Optional)

If you have multiple accounts for the recipient for whom you are filing more than one Form 1099-NEC, enter the account number you have assigned to the recipient. This helps in managing multiple forms.

Step 9: State Tax Withheld

If you have withheld any state tax from the recipient's compensation, report it in box 4 (state tax withheld), box 5 (state/Payer's state no.), and box 6 (state income).

Step 10: Review the Form

Double-check all the information for accuracy. Errors in the recipient’s TIN or name can lead to penalties.

Step 11: Copy Distribution

Copy A: Goes to the IRS.
Copy 1: For state tax department (if applicable).
Copy B: To be sent to the recipient.
Copy 2: To be filed with the recipient’s state income tax return, when required.
Copy C: For the payer’s records.

Step 12: File the Form

Electronic Filing: You can file electronically through the IRS FIRE system (Filing Information Returns Electronically).

Paper Filing: Mail Copy A to the IRS with Form 1096, which serves as a cover sheet.

Step 13: Send Copy to Recipient

Ensure the recipient receives their copy (Copy B) of Form 1099-NEC by January 31st of the year following payment.

Step 14: Keep Records

Retain Copy C for your records for at least three years from the date you filed the form.

Step-By-Step Guide to Filing Your 1099-NEC Form Online