IRS Form 1099-NEC

Form 1099-NEC: Nonemployee Compensation

Report payments of $600 or more to independent contractors and other nonemployees for services performed in your trade or business.

Filing Deadline

January 31 (IRS and recipient)

Payment Threshold

$600 or more per year

Recipients

Independent contractors, freelancers

Overview

Form 1099-NEC is used to report nonemployee compensation paid to individuals who are not employees. This includes payments to independent contractors, freelancers, and other service providers.

The form was reintroduced in 2020 (previously included in Form 1099-MISC Box 7) to separate nonemployee compensation reporting with its own earlier filing deadline to help the IRS combat tax fraud related to the Earned Income Tax Credit.

Who Must File

Required Filers

•Businesses that paid $600+ to independent contractors or self-employed individuals
•Businesses that paid for services in the course of trade or business
•Payments to attorneys (regardless of incorporation status)
•Businesses that withheld federal income tax under backup withholding rules

Exceptions & Notes

✕Payments to corporations (except attorneys and medical/health care payments)
✕Personal payments not related to a trade or business
✕Payments for merchandise, freight, storage, or similar items
✕Rent, prizes, awards, or other income (use Form 1099-MISC instead)

Form Structure & Instructions

Here's what information is required in each section:

Payer Information

Details about the business making the payment

Top

Payer Name & Address

Business name, street address, city, state, and ZIP code

Top

Payer TIN

Employer Identification Number (EIN) or SSN of payer

Recipient Information

Information about the person receiving payment

Middle

Recipient Name

Full name of independent contractor or nonemployee

Middle

Recipient TIN

SSN or Employer Identification Number (EIN)

Middle

Recipient Address

Street address, city, state, and ZIP code

Middle

Account Number

Optional account number for tracking purposes

Payment Information

Amounts paid during the tax year

Box 1

Nonemployee Compensation

Total amount paid for services performed by nonemployee ($600 or more)

Box 2

Payer Made Direct Sales

Check if $5,000+ of consumer products sold for resale (on commission or buy-sell basis)

Box 4

Federal Income Tax Withheld

Federal income tax withheld under backup withholding rules

Box 5-7

State Tax Information

State number, state income, and state tax withheld (if applicable)

Important Filing Notes

Early Deadline

Form 1099-NEC must be filed by January 31 (both to the IRS and to recipients). This is earlier than most other 1099 forms which are due February 28/March 31.

Separate from 1099-MISC

Nonemployee compensation was moved from Form 1099-MISC Box 7 to this dedicated form in 2020. Do not report nonemployee compensation on Form 1099-MISC.

W-9 Collection

Always collect Form W-9 from contractors before making payments. This ensures you have the correct TIN and helps avoid backup withholding requirements.

Penalties for Late Filing

Penalties range from $60-$310 per form depending on how late the filing is. Intentional disregard carries higher penalties. Electronic filing required for 250+ forms.

Additional Resources

IRS Form 1099-NEC (PDF)

Download the current year form

Instructions for Forms 1099-MISC and 1099-NEC

Complete IRS instructions

Form W-9

Request for Taxpayer Identification Number

Independent Contractor vs. Employee

IRS guidance on worker classification

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