What Is Form 1099-NEC

Form 1099-NEC

A new sheriff is in town: Form 1099-NEC. But it’s not as new as you may think. After disappearing in 1982, Form 1099-NEC found its way back into taxation in 2020. For over 35 years since it was removed, businesses used Form 1099-MISC to report nonemployee compensations. But with the re-introduction of Form 1099-NEC, businesses can now report their non-employee compensations using Form 1099-NEC.

It is important to note that Form 1099-NEC is not a replacement of Form 1099-MISC. The IRS just separated reporting of nonemployee compensations from Form 1099-MISC in 2020. There’s also much you should know about Form 1099-NEC. Here is an overview of the new 2020 Form 1099-NEC.

What is Form 1099-NEC?

Form 1099-NEC is used by businesses to report compensations given to nonemployees.

What is Form 1099-NEC?

Form 1099-NEC is used by businesses to report compensations given to nonemployees.

Why Was Form 1099-NEC Brought Back?

Before the PATH Act (Protecting Americans from Tax Hikes Act), companies filed a single Form 1099-MISC to report both nonemployee compensation and miscellaneous incomes. All taxpayers were required to file their reports by February 28 every year.

However, when the PATH Act came into action, it changed this date to the last day of January each year for businesses to report nonemployee compensation.

Due to this date change, most businesses began separating nonemployee compensation reports from miscellaneous income reports using two different Form 1099-MISC.

This brought too much confusion for both business and the IRS as any forms submitted after January 31 were treated as late returns. For this reason, the IRS decided to bring back Form 1099-NEC to end the confusion by separating the two reports.

Who Uses Form 1099-NEC?

If your business meets the following conditions, you must file Form 1099-NEC:

  • Your business has made compensations to anyone who is not an employee of the company.
  • The compensation is made for services designed for your business.
  • Compensation was made to an individual, partnership, or corporation.
  • The compensation made is $600 or more for that year.

The payment examples you should file on Form 1099-NEC include:

  • Payment for professional services such as lawyer fees.
  • Payment for any services received
  • Commissions made to nonemployee salespersons.

You do not need to fill Form 1099-NEC when dealing with personal payments. The form is only used to file payments made for your business and making profits.

Where to get Form 1099-NEC

You can go to the IRS website and download an online copy of Form 1099-NEC. You can also order paper copies directly from the IRS.

You must fill and file the form with the IRS and copy the nonemployees who need it for their tax returns.

How to fill the form

The form has the following key sections to be filled:

  • Your personal information
  • Recipient’s information
  • The amount compensated
  • Federal income tax withheld
  • State information

Your personal information and recipient’s information include your official names, physical address, and taxpayer ID.

Can the form be filed electronically?

StateAddress to mail your form
Alabama, Arizona, Arkansas, Delaware, Florida, Georgia, Kentucky, Maine, Massachusetts, Mississippi, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Texas, Vermont, VirginiaDepartment of the Treasury Internal Revenue Service Center Austin, TX 73301
Alaska, Colorado, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, North Dakota, Oklahoma, Oregon, South Carolina, South Dakota, Tennessee, Utah, Washington, Wisconsin, WyomingDepartment of the Treasury Internal Revenue Service Center P.O. Box 219256 Kansas City, MO 64121-9256
California, Connecticut, District of Columbia, Louisiana, Maryland, Pennsylvania, Rhode Island, West VirginiaDepartment of the Treasury Internal Revenue Service Center Ogden, UT 84201

Where to send copies of Form 1099-NEC

There are multiple copies you should distribute to different parties after filling the form. Here are the relevant parties to send copies to.

  • The IRS
  • State Tax Department
  • The compensated party
  • keep one for your records