Form 1099-NEC reports payments of $600 or more made to independent contractors and other nonemployees. Both the IRS copy and the contractor copy are due by January 31 — there is no automatic extension.
- File for every contractor paid $600+ during the tax year
- Replaced Box 7 of the 1099-MISC starting in 2020
- E-filing required for 10+ total information returns
What Is Form 1099-NEC?
Form 1099-NEC (Nonemployee Compensation) is an IRS information return used by businesses to report payments made to independent contractors, freelancers, and other nonemployees. The form was reintroduced in 2020, replacing the use of Box 7 on Form 1099-MISC for contractor payments.
The “NEC” stands for Nonemployee Compensation. If you paid someone who is not your employee for services performed for your trade or business, and those payments total $600 or more in a calendar year, you must report them on a 1099-NEC.
The $600 Reporting Threshold
The $600 threshold applies to total payments made to a single payee during the calendar year. It covers cash, checks, direct deposits, and electronic payments — the method does not matter.
If you paid a contractor less than $600, you are not required to file a 1099-NEC. However, the contractor must still report the income on their tax return. Some businesses voluntarily file 1099-NEC for amounts under $600 as a best practice.
Never issue both a W-2 and a 1099-NEC to the same person for the same type of work. If someone is your employee, they get a W-2. If they are a contractor, they get a 1099-NEC. Dual filing is a red flag for IRS worker classification audits.
Who Gets a 1099-NEC?
Issue a 1099-NEC to anyone who meets all three criteria:
Common examples: freelance designers, IT consultants, bookkeepers, subcontractors, virtual assistants, and attorneys.
Filing Deadlines
| Deadline | Action Required |
|---|---|
| January 31 | Furnish Copy B to the contractor |
| January 31 | File Copy A with the IRS (paper or e-file) |
| No extension | 1099-NEC does not qualify for automatic extension via Form 8809 |
Unlike many other information returns, the 1099-NEC is not eligible for an automatic extension through Form 8809. The January 31 deadline is firm for both the IRS copy and the contractor copy.
1099-NEC vs 1099-MISC
Before 2020, nonemployee compensation was reported in Box 7 of the 1099-MISC. Now, the two forms serve different purposes:
| Factor | 1099-NEC | 1099-MISC |
|---|---|---|
| Reports | Nonemployee compensation | Rent, royalties, prizes, other income |
| IRS Filing Deadline | January 31 | February 28 (paper) / March 31 (e-file) |
| Extension Available | No | Yes, via Form 8809 |
| Common Use | Freelancers, contractors | Landlords, royalty recipients, prize winners |
| Key Box | Box 1: Nonemployee compensation | Box 1: Rent, Box 2: Royalties |
Penalties
| Timing | Penalty Per Form | Small Business Max |
|---|---|---|
| Within 30 days of deadline | $60 | $232,500 |
| By August 1 | $130 | $664,500 |
| After August 1 or not filed | $310 | $1,329,000 |
| Intentional disregard | $630+ | No limit |
Penalties also apply for filing with incorrect information (wrong TIN, wrong amount, etc.). Using the IRS TIN Matching service before filing can help you catch errors early.
Frequently Asked Questions
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Related Forms
Form W-4
Complete guide to the W-4 form — how employees claim withholding allowances, when to update it, and how employers process it for federal income tax withholding.
Form W-2
Everything employers need to know about the W-2 form — filing deadlines, box-by-box instructions, corrections, and electronic filing requirements.
Form W-9
Guide to the W-9 form — when to request it from contractors, how to verify TINs, and how it connects to 1099 reporting requirements.