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The 1099-NEC form is required for all non-employees who earn $600 or more in a year from your company. Read more to learn who qualifies, when to file, and what will happen if you fail to file the 1099-NEC form by the deadline.
What Is a 1099-NEC Form?
A 1099-NEC form is used to report non-employee compensation. Businesses must complete a 1099-NEC form to inform the IRS of any compensation paid throughout the year to an individual who was not a direct employee of the company. Examples include freelancers, gig workers, contractors, consultants, etc. Reporting compensation from the previous year is due by January 31.
Who Gets a 1099-NEC Form?
The 1099-NEC is required for each US-based non-employee who meets all of the following qualifications.
Earned at Least $600
If a non-employee earned $599 or less throughout the year, a 1099-NEC form is not required.
Not Your Employee
Because employees complete a W-2 for their tax information, a 1099-NEC is only required for non-employees.
Paid for Business Services
Throughout the year, the non-employee was paid $600 or more for services such as training courses, janitorial services, labor, or payments of legal fees to an attorney.
Individual, Partnership, or Estate
The non-employee doesn’t have to be an individual contractor. A partnership or estate who has provided services for more than $600 throughout the year must also receive a 1099-NEC form.
How to File a 1099-NEC Form
The 1099-NEC form can be filed online or by mail. It can be downloaded or completed as a fillable PDF on the IRS website. The deadline to file with the IRS and send the form to the non-employee is January 31.
Step 1: Download or Complete Using IRS Free File
The form can be downloaded to your computer or completed using a fillable online PDF format using IRS Free File at IRS.gov.
Step 2: Information needed
To complete the form, you will need the non-employee’s total compensation earned over the year. Remember, it must be more than $600. This compensation amount includes fees, commissions, and prizes for services performed.
You will also need your TIN (Tax Identification Number), the individual’s TIN, the individual’s name and address, and the amount of any taxes withheld.
Step 3: Provide to Payee
Once you’ve completed and filed the form, send the form to the non-employee.
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Alaura is an espresso-addicted HR professional who loves improving processes and providing the best experience to employees. She focuses on performance management, compensation best practice, and leadership coaching and strategy. When not working, she loves playing video games and making sourdough bread.
