What is Form 1099-NEC?

Form 1099-NEC (Non-Employee Compensation) is the form businesses use to report payments made to independent contractors and freelancers. The IRS uses it to cross-check that contractors are reporting all their income.

**The $2,000 threshold**

You must issue a 1099-NEC if you pay an unincorporated individual or entity $2,000 or more during the calendar year for services (payments made after 31 December 2025; the threshold was $600 up to and including 2025, and is indexed to inflation from 2027). Note: payments to C-corporations and S-corporations generally do not require a 1099-NEC (with exceptions for attorneys, which always get a 1099 regardless of corporate status).

**Deadline: 31 January**

Both recipient copy and IRS filing are due 31 January of the year following payment. This is earlier than most other 1099 forms and earlier than the W-2 deadline (also 31 January). Copies must be mailed to recipients by 31 January and filed with the IRS by 31 January (electronic filing).

**Collecting W-9s**

Before paying any contractor, request a completed Form W-9 (Request for Taxpayer Identification Number). The W-9 captures: - Legal name and entity type - SSN (individual) or EIN (business) - Business address - Whether they are subject to backup withholding

Keep W-9s on file for at least 4 years. If a contractor refuses to provide a W-9 or TIN, you must withhold 24% backup withholding from future payments and remit to the IRS.

**Penalties for not filing**

- Filed late (up to 30 days): $60 per form - Filed 31 days late to 1 August: $130 per form - Filed after 1 August or not at all: $340 per form - Intentional disregard: $680 per form (no maximum)

Importantly, even if you don't issue a 1099-NEC, you can still deduct the contractor payment as a business expense, but the IRS may penalize you for the missing form and may audit the contractor's reported income.

**1099-NEC vs 1099-MISC**

The IRS reintroduced Form 1099-NEC in 2020 specifically for contractor payments (previously reported in Box 7 of 1099-MISC). Form 1099-MISC is still used for other types of payments: rent (Box 1), prizes and awards (Box 3), and other income. If you pay rent to an unincorporated landlord of $600+, that still goes on 1099-MISC, not 1099-NEC.