Businesses and self-employed individuals that pay individuals and businesses $600 or more for services are required to issue 1099-NEC forms. Formerly, these payments were reported for form 1099-MISC; however, the IRS created a new form solely for Non-Employee Compensation (form 1099-NEC).
Generally two copies of 1099 forms are issued. One copy is filed with the IRS and the second copy is given to the individual/business that performed the services.
Certain Payments are Exempt from 1099-NEC Reporting. Exempt payments include:
- Payments below $600 (in aggregate for the entire calendar year)
- Payments made via debit card or credit card (the payment processor is responsible for issuing a different type of 1099, form 1099-K)
- Payments made via a payment processor where the payment processor is required to issue a 1099-K. You can typically find information on the payment processor’s website that indicates whether the payment processor issues a 1099-K form. For instance, this Zelle webpage says Zelle does not issue 1099 forms, meaning Zelle users are required to issue 1099-NEC forms for payments that require 1099-NEC reporting.
- Payments to corporations. You can typically tell if a business is a corporation if it has Inc, Corp, or Corporation in it’s name. Note that LLCs are not corporations and generally require 1099-NEC forms. Also note that payments to law firms, even if structured as a corporation, still require 1099-NEC forms.
How should you collect information and determine if a 1099-NEC is required?
You should have individuals and businesses that perform services for you complete a form W-9. A W-9 is an IRS form that is used to collect an individual or businesses’ name, address, tax type, tax ID number, and other information used to both determine if a 1099-NEC is required and prepare 1099-NEC forms.
What are the Due Dates related to 1099-NEC forms?
1099-NEC forms should be filed with the IRS and provided to the individuals/businesses the performed the services by January 31 of the following year. For instance, 1099-NEC forms reporting payments made in 2023 are due January 31, 2024.
How should you prepare & file the 1099-NEC forms?
There are a number of options available. One that I’ve used and recommend is Tax1099.com. You can e-file the 1099-NEC forms with the IRS for a small fee, import data from a spreadsheet template, view and print copies for your records, and pay a small fee to have them mail the 1099-NEC forms to the individuals/businesses on your behalf.
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Please note: the information on this website is intended to provide general advice to start the discussion with your tax professional. The information on this website may not apply to your specific situation. Only an experienced professional with the details of your specific situation can advise you on making the best decision. Contact me or your tax professional to discuss the information on this site to make an informed decision.