Fillable Form 1099-NEC (Non Employee Compensation)

What is the 1099-NEC Form?

Form 1099-NEC, also known as the Non-Employee Compensation form, is a tax document used to report non-employee compensation paid to individuals for services rendered. The form is used to report income received by a person who is not considered an employee of the company, such as independent contractors, freelancers, and self-employed individuals. 

Form 1099-NEC was reintroduced in the 2020 tax year after a gap of over 30 years.The introduction of Form 1099-NEC aimed to make the reporting process for non-employee compensation more straightforward and reduce the number of errors made by taxpayers.

Form 1099-NEC is used to report payments made to individuals for services rendered, and is filed by the person or company that made the payment to the individual. If a business has made non-employee compensation payments of $600 or more to an individual during the tax year, they must file Form 1099-NEC.

It’s important to note in the case of a Form 1099-NEC that if the recipient is a resident of a state that has state income tax, they may need to file a state tax return to report their non-employee compensation income. In some cases, the payer may be required to withhold state income tax, depending on the state’s laws. 

How do I fill out the 1099-NEC Form?

Form 1099-NEC is divided into several sections, each of which ask for information about the recipient, the payer, and the amount that will be paid. The form itself must be filed alongside Form 1096, so make sure to have all relevant documents ready to ensure that the information entered here is correct and true. 

Step 1: Payer’s Name and Address Information

Enter the payer’s full legal name (or their company name, if applicable). Then enter their street address, city or town, state or province, country, and ZIP code. 

Step 2: Payer’s TIN

Enter the payer’s Taxpayer Identification Number (TIN). 

Step 3: Recipient’s TIN

Enter the recipient’s TIN.

Step 4: Recipient’s Name

Enter the recipient’s full legal name. 

Step 5: Recipient’s Street Address

Enter the recipient’s street address.

Step 6: Other Address Information

Enter the recipient’s city or town, state or province, country of residence, and ZIP or Foreign Postal Code.

Step 7: FATCA Filing Requirement

Check the box provided if the payer is reporting this form to satisfy its chapter 4 account reporting requirement. For more details, see the instructions for Form 8938.

Step 8: Account Number

Enter the recipient’s account number. This may also be any unique number that the payer assigned to distinguish the recipient’s account. 

Check the box provided if the recipient has received a second TIN notice of their TIN being wrong.

Box 1: Nonemployee Compensation

Enter the amount paid to the recipient. Note this amount down - it may be required for other forms. 

Box 2 and 3

These boxes are reserved for the IRS’s use. Do not fill them out.

Box 4: Federal Income Tax Withheld

Enter the amount of federal income tax withheld from the nonemployee compensation

Box 5: State Tax Withheld

Enter the amount of state tax withheld. 

Box 6: State/Payer’s State Number

Enter the state or the payer’s state number assigned to the business.

Box 7: State Income

Enter the amount of state income tax levied.

Frequently Asked Questions (FAQs)

By when should Form 1099-NEC be filed?

Form 1099-NEC must be filed by January 31. 

What happens if I file Form 1099-NEC late?

The IRS imposes steep fines on late submissions of tax forms, so make sure to submit the form on time.

What qualifies as “Nonemployee Compensation”?
Generally speaking, any payment made to a person that is self-employed will be considered nonemployee compensation. 

Are there people/entities that do not need to file a Form 1099-NEC?

Yes. Incorporated vendors do not require a 1099-NEC or 1099-MISC to be issued at year-end, but a Form W-9 can still be requested from them. If you are unsure, you may still file a Form 1099-NEC or otherwise for them, and the IRS will simply choose not to process the form if it does not apply.

Does the 1099-MISC form still exist?

Yes. The 1099-MISC still has all boxes other than Box 7. The box numbers after box 7 have been shuffled around, but otherwise, it is the same, just missing Nonemployee compensation. It is now due to the IRS by Mar. 31.

Do I need to file a Form 1099-NEC for a tax year before 2020?

No. Form 1099-NEC was not active before 2020, so in such cases one must file the older version of Form 1099-MISC that still contains the section for declaring nonemployee compensation.

Who should each of the copies of Form 1099-NEC be given to?

Copy A is for the IRS’ uses, Copy 1 for the state tax department, and Copy 2 for the recipient’s use. 

Do I need a TIN to file a Form 1099-NEC?
Yes. A proper TIN is needed in order to file tax forms of any kind without incurring penalties from the IRS.

What happens if the TIN provided by the recipient is wrong?

The IRS will contact the payer and the recipient to notify both that the TIN provided is wrong or invalid. If the error is not corrected, the IRS may fine one or both payer and recipient depending on the reason for why the TIN is not provided and how long it takes for the TIN to be corrected.

How do I correct errors on Form 1099-NEC?
Make the necessary corrections and contact the IRS to inform them that you are submitting an updated copy of the form.

What is the difference between Form 1099-MISC and Form 1099-NEC?

Form 1099-MISC is used in the reporting of payments that are not subject to self-employment tax, such as things like rent and prize money. Form 1099-NEC is used for reporting non-employee compensation that is most likely subject to self-employment tax.

What is the difference between Form 1099-NEC and Form W-2?

Form W-2 is used to report wages paid to an employee, while Form 1099-NEC is used to report payment given to a nonemployee.

Do I have to be the one to file Form 1099-NEC if I paid on behalf of another person that provided the funds?

Yes. You are considered the payor for information reporting purposes if you perform management or oversight functions in connection with the payment, or have a significant economic interest in the payment (such as a lien).

What payments do NOT have to be declared on Form 1099-NEC?

Payments that need not be declared on Form 1099-NEC include:

• Payments to corporations
• Payments for merchandise, telegrams, telephone, freight, storage, and other similar items
• Payments of rent to real estate agents and property managers.
• Wages, bonuses, prizes, or any other amount paid to employees
• Military differential wage payments made to employees
• Business travel allowances paid to employees
• Cost of current life insurance protection
• Payments to tax-exempt organizations
• Payments made to or for homeowners from the Hardest Hit Fund (HFA) or similar state program
• Compensation for injuries or sickness by the Department of Justice as a public safety officer disability or survivor's benefit
• Compensation for wrongful incarceration for any criminal offense for which there was a conviction under federal or state law.

Are there services that help with filing taxes?

Yes. Hiring an accountant to manage financial and tax forms is an option that is available to all taxpayers. However, note that all information on all forms filed by accountants or other such services is still the taxpayer’s responsibility to verify as correct and true.