How to Fill Out a 1099-NEC Form in 2023: Useful Advice

What is a 1099-NEC

The 1099-NEC form is used for reporting non-employee compensations. Business owners who work with self-employed taxpayers have to learn how to fill out 1099 NEC instead of 1099-MISC. Yet, the 1099-NEC form is not entirely new. It was used in 1982 and earlier. Until 2020 businesses had to use 1099-MISC to inform the IRS on payments of $600 and more to their nonemployees, like independent contractors. These payments were usually filed as compensation for nonemployees and had to be indicated in box 7 of Form 1099-MISC.

Recently, the IRS decided to make these payments clear and re-opened 1099-NEC for it. The form has separate deadlines and instructions on filling out a 1099 NEC. All the taxpayers who use this form, no matter whether they are business owners or self-employed freelancers, have to file them by the deadline on January 31. If you want to know how to get form 1099-NEC, you can read the article dedicated specifically to this procedure.

1099-NEC Form

Who Fills Out a 1099-NEC Form

You have to learn how to file 1099 NEC if you are a business owner that hires an independent contractor or freelancer for specific work and pays $600 or over. If you are paying less or paying the exact sum of money to several nonemployees in total, you don’t have to file the form. The minimal amount is $600 for a person. If you used 1099-MISC before, you have to switch to 1099-NEC.

If you are self-employed and received a payment of $600 and more from the business during the year, you have to ask for this form. A business owner who hired you has to send it to you no later than by January 31 of every year. This form will be used for your own tax return report.

How to Fill Out a 1099-NEC Form in 2023

Read this detailed instruction on how to complete a 1099 NEC before you download it. The good news is that you can file it online without downloading it. The form is 8-pages long, but don’t worry, there are many copies of one table you have to file. Plus, there are detailed instructions on every step. Copy A is highlighted with red color and is made as an example, so you don’t have to file it or download it. But you still should fill it out, since all the information that you enter there is automatically applies to all other copies.

1. Specify the current year.
2. Write down information about the payer, including address with a street and ZIP code, full name, and a phone number. Provide payer's state number there;
3. Include payer's TIN on the second line and recipient’s one on the third.
4. Lines 4, 5, 6, and 7 are dedicated to the recipient. You have to include the name, street address, name of the city or town, and a number of the account. There are instructions for the account number on 1099 in the form.
5. Box 1 is for the non-employment compensation. Calculate every payment you’ve made to the recipient;
6. The 2nd box requires the tick if the payer has made sales of $5000 or higher to the recipient for resale. It can be a buy-sell basis or deposit-commission. You have to report about this on the Schedule C of Form 1040 as well.
7. File the box 4 federal withholding correctly. You need to double-check all the numbers you include in the form. If you did not give the TIN to the payer, the payer needs to back up the withhold on some payments.
8. Box 5 is about the state taxes that were withheld.
9. In box 6, you have to provide the state no of the payer
10. Box 7 is filled with the state income.

On the fifth page of this form, you will find detailed instructions on how to fill the document. If you have noticed empty box 3, don’t worry, it was made specifically. The IRS reserves this box for use in the future. There is also an explanation about the recipient account number, which you have to fill. You can show a unique number or account that the payer uses to check the uniqueness of the account.

The form can be filled on the IRS website, or you can use the easier way and open it directly on PDFLiner. PDFLiner already has the form and is simple to navigate. You can complete it online without downloading, and it allows you to edit the form as much as you want. If you need an electronic signature, you can create it using the editor. If you notice a mistake, it is easy to fix it in PDFLiner. After you complete the form, you can save it anywhere you want and send copies to the nonemployee and IRS.

Fill Out Form 1099-NEC

How to File 1099-NEC Forms

There is a strict deadline for this form. All 1099 forms must be completed and sent until January 31. If this is Sunday, you can postpone it to February 1. There is not a 30-day automatic extension. Yet, if your business meets some specific conditions, you have to inform the IRS about it and ask for the delay. If the IRS does not find your conditions exclusive, you still have to provide the form by the date or pay the fee.

You don’t have to send the form to the IRS by regular post. All you need to do is to use the IRS app and file it electronically to them. For this, you need to have an IRS official app, which is simple to download on their website. If you want to send it as a paper copy, you have to find the closest IRS center that accepts it. You also need to send the copies to the parties that require it, including your nonemployee.

FAQ

Check out the most popular questions about the 1099-NEC form. Read the answers as they may help you to complete the document.