Form 1099-NEC Instructions & Tax Reporting Pointers

The Purpose of Filing Form 1099-NEC

Beginning in 2020, the 1099-NEC is used to report payments of $600 or more to service providers — typically work done by an independent contractor who is a sole proprietor or member of a partnership. Examples include graphic designers, Web developers, cleaning professionals, freelance writers, landscapers and other self-employed individuals. Basically, the 1099-NEC form is to independent contractors what the W-2 is to employees.

The 1099-NEC captures non-employee compensation, in addition to documenting that you didn’t deduct any federal, state or other taxes. Unlike employees with W-2s, independent contractors get their full pay without any automatic deductions. It’s up to them to keep track of their taxes and pay them directly to the government.

Basic 1099-NEC Filing Instructions

To complete a 1099-NEC, you'll need to supply the following data:

Business information – Your Federal Employer ID Number (EIN), your business name and your business address.

Recipient's ID Number – The recipient's Social Security number or Federal Employer ID Number (EIN).

Payment Amounts – Enter nonemployee compensation amounts paid in Box 1.

Federal Income Tax Withheld – Enter any amounts of federal income tax withheld from payment in Box 4. (You'll use this if you’re sending a 1099-NEC to an individual who refused to provide a W-9 or TIN. In this case, the federal government may require you to withhold 24% of the money you paid and send it the IRS.)

There may be instances in which you need to provide both a 1099-MISC and 1099-NEC to the same individual, however that will depend on the business conducted with them in that year. If you are unsure it's always best to consult a tax attorney in order to remain compliant.

Get more tips on how to determine who gets a 1099-NEC form here.

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Basic 1099-NEC Filing Instructions

Breaking Down the Multi-Part 1099-NEC

The 1099-NEC is a multi-part form that is handled as follows:

Copy A — File with IRS by the paper or electronic-filing deadline.

Copy 1/State Copy — File with the appropriate state taxing authority, if applicable.

Copy B — Distribute this copy to individuals, who then file it with their federal income tax return. It must be delivered by January 31*. You will meet the IRS’ distribution requirement if the form is properly addressed and mailed on or before this due date.

Copy 2 — Distribute this copy to individuals, if applicable. Individuals will then file this copy with their state taxing authority. Again, it generally must be delivered by January 31*.

Copy C — Retain this copy for your records.

*In 2021, January 31 is Sunday; therefore the deadline is Monday, February 1, 2021.

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Make the Switch to 1099 Electronic Filing

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