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e-File Form 1099-NEC with us Start Filling Now >>

What is Form 1099-NEC?

Form 1099-NEC (officially known as nonemployee Compensation) is a new tax form that’s used to report compensations given to nonemployees by a company. Form 1099-NEC was reintroduced by the IRS as a new way to report self-employment income. Any payment totaling $600 or more made to a nonemployee must be filed using form 1099-NEC. Form 1099-MISC was used for this purpose till tax year 2019.

Overview of Form 1099 Nonemployee Compensation

Form 1099-NEC was introduced way back in 1980 during Reagen’s presidency. But the year 1982 marked the end of form 1099-NEC, when the IRS moved the information on the Form 1099-NEC to Form 1099-MISC.

As Form 1099-MISC was used to report different kinds of payments with different due dates it
was confusing for employers, taxpayers and IRS employees alike. To clear up this confusion, the IRS decided to bring back form 1099-NEC to report nonemployee compensation starting 2020.

Why did the IRS Re-introduce Form 1099-NEC?

As form 1099-MISC was used for two different types of submissions with two separate deadlines, it led to a lot of confusion among the form filers. So in 2020, the IRS decided to reintroduce form 1099-NEC exclusively for filing nonemployee compensations.

Who should get form 1099-NEC?

All businesses must file a Form 1099-NEC form for nonemployee compensation if the below conditions are met:

  1. If you made service payment to someone who is not your employee
  2. If you made payment for any kinds of service in the course of your trade/business
  3. If you made payment to an individual, partnership, estate, or corporation
  4. If the total payment you made is at least $600 for the year

Additionally, you will need to file Form 1099-NEC when you pay an individual at least $10 in royalties, or if you have withheld any federal income tax under the backup withholding rules regardless of the payment amount for that year to a nonemployee.

See the below example for a better understanding:

  • Sean runs a construction company in Oregon called Venture Builders. He has close to a 100 employees working in his company. For one of his projects, Sean hires Mark, a contractor worker and pays him $750 for his carpentry work.
  • Sean needs to get a form 1099-NEC and fill out the copy A of the Form. Sean also needs to provide copy B of the form 1099-NEC to Mark, so that he can furnish Copy B and send it back to Sean. Sean will then submit both the copy A and B to the IRS by January 31st.

When is form 1099-NEC due?

Employers are required to furnish Form 1099-NEC to the payee and file the form to the IRS by January 31st. Since January 31st 2021 is a Sunday, you must file your next form on 1st February, 2021.

Details required to fill in 1099-NEC Form?

You need the following information information ready before you start your form 1099-NEC filing process:

  1. Business’s name, address, and phone number
  2. Business’s Taxpayer Identification Number (TIN)
  3. Recipient’s name, address, and TIN
  4. Total nonemployee compensation (in USD)
  5. Federal and state income tax withheld

Where should you send Form 1099-NEC?

Just as you send Form 1099-MISC, you need multiple copies of form 1099-NEC that needs to be distributed to the following recipients:

  1. Copy A: The IRS
    You need to submit the Copy A of Form 1099-NEC by January 31, 2020 to the IRS either by e-filing it or by mail.

    • For paper filers:
      If you are planning to file your form manually, you will need to attach another form called Form 1096 as a cover sheet. Once both the forms are completed, you can mail them to the IRS.
    • For electronic filers:
      If you want to file electronically, you can choose an authorized, IRS approved e-filing service provider such as eForm1099 which is easy, convenient and time saving.
  2. Copy B: Independent contractor
    You need the contractor to send you a signed consent before you can send him/her a copy of your form. You must obtain the consent through email or written mail. Your consent must comply with the IRS rules:

    • The consent must affirm that if the recipient does not consent to receiving an electronic copy, they will receive a paper one.
    • The consent must outline its scope and duration.
    • The consent must have information on how to request a paper copy from you, even if they received an electronic one.
    • It must have instructions on how to withdraw consent at any time. You must also confirm their withdrawal in writing.
    • The consent must state under what conditions the statement may no longer be provided—for example, if the contractor’s contract is cancelled, or if you end up paying them less than $600 for their services.
    • The procedure they need to follow to update their information with you.
    • A description of the hardware and software they need to view and print the form.
    • A date at which the form will not be available.
  3. Once you’ve received consent from the contractor, you can then proceed to send them Copy B.

  4. Copy C: For your business records
    In addition to the copies you send the IRS and the contractor, you must keep a copy of the form for your business records for future reference.

1099 Other Income Vs Nonemployee Compensation

The 1099-NEC is used to report independent nonemployee compensations (NEC). Earlier Form 1099-MISC had a dedicated section to report such income. But now, the IRS has decided to create a separate form for filing nonemployee compensations, dubbing it Form 1099-NEC.

Form 1099-MISC is now used to report miscellaneous income such as rent or payments to an attorney. Although the 1099-MISC is still in use, contractor payments made in 2020 and beyond will be reported on the new form 1099-NEC.

The due date for both forms is January 31 in the year following the applicable tax year. If January 31 does not fall on a business day, the due date will be moved to the next business day.

State Filing Requirements for 1099-NEC

Wisconsin

The Wisconsin Department of Revenue announced that they will be requiring Form 1099-NEC. Those who make payments to nonemployees must report it federally, including payments made to Wisconsin residents and nonresidents for services performed in Wisconsin. For Tax Year 2020, businesses that must report nonemployee compensation may submit either Form 1099-MISC or Form 1099-NEC to the department. 

Arizona

Arizona has confirmed that they will require 1099-NEC filing with their Department of Revenue. Presently Publication 701 indicates that all 1099s reporting Arizona income tax withheld are required for state reporting purposes. Form 1099-NEC can be reported through online filing or manual filing, with web upload functions becoming available at a later date. 

D.C.

The District of Columbia will require payors to report Form 1099-NEC to the state if reporting $600 or more in payments annually.  Forms 1099 are due to the territory by February 1, 2021 as the statutory due date, January 31, will fall on a weekend. The District of Columbia does not require a withholding identification number, or similar, on 1099s issued to the territory.

Delaware

The Delaware Department of Revenue has announced a requirement to file Form 1099-NEC for TY 2020. The 1099-NEC will be due on February 1, 2021 and will be required when the form is issued to a Delaware resident (regardless of where the services were performed) or to non-residents who performed work within Delaware.


State ID is required when filing with Delaware.  An employer’s Delaware ID number is its 9-digit Federal employer ID. 

Indiana

The Indiana Department of Revenue recently published updated electronic filing specifications for 1099-NEC returns. 1099-NEC records must be filed with the state if the record reports Indiana state withholding. These records, like other 1099s reporting state withholding, must be filed directly with the Indiana Department of Revenue.

Iowa

The Iowa Department of Revenue has provided instructions, information, and specifications for submitting W-2 and 1099 records to the Department electronically. Primarily the updates to these specifications and instructions involves the acceptance of Form 1099-NEC through the Iowa electronic filing system. 

State IDs are required for Iowa if there is state withholding which is referred to as Business eFile Number (BEN). A bulk filer must use its own BEN to log into eFile & Pay and must report the respective filer’s (employer/payer) BEN on RV and K records when the filer withheld Iowa tax. 

Kansas

Kansas recently released its 2020 Specifications for Electronic Submission of 1099 and W2G forms, adding specifications for filing forms 1099-NEC with the state, confirming that Kansas will now require state filing of the form. Generally Kansas requires that all Forms 1099 that must be filed federally must also be filed with Kansas.

Kentucky

Forms 1099 submissions to Kentucky are required to be in electronic format on CD. Payers issuing 25 or fewer forms must either file Form K-5 or submit the information in the prescribed format on CD. State ID is required when withholding.  The state ID is the Kentucky Withholding Account Number (6 digits). 

Maryland

Form 1099-NEC must be reported directly to the state if Maryland withholding is greater than zero. The 1099-NEC now joins the other information returns due to the department by January 31. Please note that a Maryland Central Registration Number, the eight-digit tax withholding account number is required when reporting 1099-NEC records. State IDs are required when reporting withholding. State IDs are referred to as Maryland Central Registration Numbers, an eight-digit number assigned by Maryland when you open a state withholding account.  

Missouri

The Missouri Department of Revenue will require payors to report Form 1099-NEC to the state if reporting $1,200 or more in payments annually.  Forms 1099 are due to the state by March 1, 2021 as the statutory due date, February 28, will fall on a weekend. Missouri does not require the inclusion of a state withholding identification number, or similar, on 1099s issued to the state.

Nebraska

Form 1099-NEC is due by January 31 following the taxable year. Nebraska requires a state employer identification number when reporting 1099s electronically in Locations 371-379 in the Payor/Transmitter “A” Record. State IDs are required when filing with Nebraska, these numbers are referred to as the Nebraska ID Number.  

New Jersey 

New Jersey’s Division of Taxation has mandated filing of Form 1099-NEC to the Division by February 15, 2021. The forms must be sent to the Division if reporting $1,000 or more or if there is state withholding. New Jersey will require this form to be provided electronically. 

North Carolina

Form 1099-NEC will now be required for TY 2020 if the statement reports North Carolina income tax withheld. These must be filed on or before January 31, 2021. Filing may be done electronically or on paper using the existing information return filing requirements. State ID is required when filing 1099-NEC.  If you send in a paper registration, you should receive your withholding number within four weeks. 

Oregon

Oregon will require payors to report Form 1099-NEC to the state when filing 10 or more returns federally. Forms 1099-NEC are due January 31 of the following year. For tax year 2020, January 31 falls on a holiday weekend so the forms are due by February 2. Oregon requires a Business Identification Number (BIN) on 1099 records issued within the state. This is a unique identifier for businesses filing in Oregon. 

West Virginia

West Virginia specifications require 1099-NECs that reflect West Virginia withholding to be reported to the state’s Department of Revenue.  The due date for W-2s and 1099s reported to the state remains January 31. Forms 1099 reported to West Virginia require the inclusion of the payor’s state tax identification number. 

Penalty for Late Filing Form 1099-NEC

You will incur penalty if you fail to file your form 1099-NEC on time. The penalty will depend on the delay of payment.

  1. Penalty of $50 if you file within 30 days
  2. Penalty of $100 if you file more than 30 days late, but before August 1
  3. Penalty of $260 if you file on or after August 1

Form 1099-NEC Filing Extension

There are no automatic extension requests for Form 1099-NEC. Instead, the IRS will grant only one 30-day extension, and only for certain reasons. Extension requests must be submitted on paper.

Role of W-9 in Filing Form 1099-NEC

Form W-9 is an IRS-created form that a payer provides to the nonemployee for the declaration of taxpayer information and related details. The payer uses the information to fill form 1099-NEC. Form W-9 is not filed with the IRS; it's returned to the requester.

Final Thoughts

Looking for a hassle-free way to file your Form 1099-NEC? Register with FreelanceCentral today and experience the best filing experience possible. Our timely alerts and wide range of value-added services ensure that you stay well ahead of the deadline. Start filing today with FreelanceCentral - the No.1 freelancer management platform in the market.

The deadline to file 1099-NEC is January 31. Use Freelance Central for easy and fast filing. Register with us now and file your first form for free. Hurry!
The deadline tofile 1099-NEC is January 31
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