How To Prepare 1099-NEC Forms

If you have paid any non-employees, including independent contractors, freelancers, and other overhaul providers, you must report the total of these payments for the class on IRS Form 1099-NEC .

This article gives information on Form 1099-NEC, including due date, how to complete the imprint, and how to file it with the Internal Revenue Service ( IRS ) .

Key Takeaways

  • Use Form 1099-NEC to report total payments to non-employees if you paid them $600 or more during the year.
  • Give these forms to payees and report them to the IRS by January 31 of the year following the tax year being reported.
  • Tax withholding isn’t usual for non-employees, but you may need to report backup withholding.
  • Don’t use Form 1099-MISC to report payments to non-employees.

What Is shape 1099-NEC ?

Form 1099-NEC is an Internal Revenue Service ( IRS ) information form, used to report payments to non-employees each year. You must file this report with the IRS if you paid $ 600 to a freelance, mugwump contractor, or early person or business who provided services to your party during the class. The imprint besides includes data on federal and department of state income taxes withheld from payees.

You do n’t have to withhold federal or state of matter taxes from payments to non-employees unless they are subject to backup withhold rules. This is n’t a common case, and you would receive a notice if you were required to withhold from payments to a particular individual .

Who Should Receive Form 1099-NEC ?

NEC stands for “ non-employee compensation, ” and non-employees are individuals who performed services for you during the year. It includes parts and materials you paid for a non-employee, like an mugwump contractor who repaired your calculator. The 1099-NEC is besides used for payments for lawyer fees for their services, but not for gross proceeds to an lawyer as contribution of a settlement .

Form 1099-NEC is not used for employee wages and salaries. Use form W-2 to report these payments. Check with your tax professional if you have any doubts about whether person is an employee or a non-employee, or file Form SS-8 to ask the IRS to make the decision for you.

Do n’t use Form 1099-MISC to report payments to non-employees. This shape is used to report other types of payments, including rents, prizes and awards, fishing boat proceeds, and medical and health concern payments.

When Is Form 1099-NEC Due ?

Form 1099-NEC must be filed with the IRS by January 31 for the previous calendar year. This deadline is the same for both paper charge and e-filing. The accurate date may change for a year to the following occupation day if January 31 falls on a weekend or vacation .

You may be subject to late file penalties if you submit 1099-NEC forms after the due dates. The measure of the penalty is determined by how late you file and the size of your occupation .

Using a payroll overhaul supplier to prepare and file your 1099-NEC forms does n’t relieve you of the province to ensure that the forms are filed correctly and on time.

Where To Get Form 1099-NEC

You can get 1099-NEC forms from office add stores, directly from the IRS, from your accountant, or using business tax software programs. You ca n’t use a template 1099-NEC phase that you find on the internet because the red ink on Copy A is special and ca n’t be copied. You must use the official form .

Before You File Form 1099-NEC

Before you prepare form 1099-NEC, you will need a valid tax ID count for each non-employee. When you hire a non-employee, you must get a W-9 shape from them reporting this and other identifying information you ‘ll need to complete Form 1099-NEC .

Double-check the taxpayer ID numbers provided to you by non-employees to avoid issues with the IRS or department of state tax agencies. The IRS provides an Online Taxpayer ID Matching program to help you ensure that the numbers are correct.

How To Complete Form 1099-NEC

You ‘ll have to include information about your business for each 1099-NEC you prepare, including :

  • Your federal employer ID number
  • Your business name
  • Your business address

Enter the recipient role ‘s taxpayer ID number ( Social Security number, employer ID number, or federal tax ID count ) along with your business data in the boxes provided on the leave side of the page. Each is intelligibly marked as to what you should enter there .

following, accede data regarding the payments you ‘ve made to the non-employee in the appropriate box :

  • Box 1: This amount is the total you paid to the payee during the tax year.
  • Box 4: Enter the total backup withholding you have taken from this person’s payments during the year. Most non-employees aren’t required to have withholding unless they are subject to backup withholding. You would receive a notice from the IRS or a court if you were required to withholding taxes from payments to an individual.
  • Boxes 5, 6, and 7: The IRS doesn’t require that you fill in these boxes, but your state’s department of taxation might require a copy of the Form 1099-NEC with this information. Enter the person’s state income, any state taxes you might have withheld, and identify the state or states to which you’ll be reporting. Complete an additional 1099-NEC for this information if you must enter data for more than two states because the form only accommodates two.

You must besides file a 1096 transmission mannequin with 1099-NEC forms if you file these forms by chain mail.

How To Correct a 1099-NEC

Check for errors before you submit the forms to the IRS. common errors in completing 1099 forms include using the form for the wrong year, sending the form to the wrong person or company, and failing to include all request information .

You can merely correct the error if you make a mistake in completing a 1099-NEC shape and if you discover it before you submit the class to the IRS. otherwise, you must submit a correct 1099-NEC shape. Check the “ correct ” box at the clear of the new form and be certain to change Form 1096 if the correction affects your totals on this transmission shape.

frequently Asked Questions ( FAQs )

When must you file a 1099-NEC?

If you hire narrow workers, freelancers, and other servicing providers for business purposes, you must file a 1099-NEC shape. You must file this form if you have paid person $ 600 or more during the year. Use this phase to report fees paid to professionals like attorneys, accountants, or consultants, but not crude payments made to attorneys as function of a colony .

How do you file a 1099-NEC electronically?

To e-file 1099 information forms, including Form 1099-NEC, use the IRS ‘s Filing Information Returns Electronically ( FIRE ) organization. You must first apply for a Transmitter Control Code ( TCC ) to use the FIRE system. You must file electronically if you have 250 or more 1099-NEC forms to file.

Where do you mail a 1099-NEC?

You may be able to mail your 1099-NEC forms to the IRS if you have fewer than 250 of these forms to file. You can besides use an IRS-approved secret delivery serve. The mailing address depends on where your clientele is located. The IRS General Instructions for Certain Information Forms publication ( page 7 ) has a number of addresses for each state .

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