Form 1099-NEC

IRS Form 1099-NEC reports nonemployee compensation paid during the calendar year to independent contractors, freelancers, sole proprietors, partnerships, attorneys, and other nonemployees, and it replaces the use of Box 7 on Form 1099-MISC for this purpose, ensuring the IRS can match payers’ information returns with recipients’ income reporting; it also captures whether the payer made direct sales of consumer products of $5,000 or more for resale, any excess golden parachute payments, federal backup withholding, and state-level withholding, and it includes multiple copies for IRS, state, and recipient use so that electronic or paper filing and recipient furnishing comply with information return rules under the Privacy Act and Paperwork Reduction Act notices referenced in the General Instructions for Certain Information Returns.

Filing Basics And Copies

• Copy A is filed with the IRS and must be the official red scannable form; do not print and file the downloadable red Copy A from the website, and if filing on paper include transmittal Form 1096.
• Copy B is furnished to the recipient, Copy 1 is for the state tax department if required, and Copy 2 is attached to the recipient’s state return when required.
• E-file may be required when filing 10 or more information returns, is encouraged even below that threshold, and official paper forms can be ordered from IRS.gov/EmployerForms along with instructions and publications 1141, 1167, and 1179.

Who Must File

• Any payer that made reportable nonemployee compensation during the calendar year must issue a Form 1099-NEC to each recipient and file with the IRS, using the calendar-year format on the face of the form.
• If the payer made direct sales of consumer products totaling $5,000 or more to a recipient for resale on a buy-sell, deposit-commission, or similar basis, the checkbox in Box 2 must be considered even when no payments were made.

When To Furnish And File

• Furnish recipient copies by the standard information return recipient due date printed in the General Instructions for Certain Information Returns and file Copy A with the IRS by its due date for the calendar year shown.
• Use the CORRECTED indicator when issuing corrected recipient copies and follow corrected return procedures for any corrections submitted to the IRS.

How to Complete Form 1099-NEC

Header And Identifiers

• For Calendar Year: Ensure the correct four-digit calendar year is shown at the top of each copy of the form.
• VOID: Mark “VOID” only for a form issued in error that should not be processed; then prepare and issue a correct form if appropriate.
• CORRECTED: Check “CORRECTED” when reissuing to fix previously furnished information and follow IRS correction procedures for returns filed.

Payer And Recipient Blocks

• PAYER’S Name, Address, Telephone: Enter the payer’s legal name, full mailing address including street, city or town, state or province, country, ZIP or foreign postal code, and a telephone number.
• PAYER’S TIN: Enter the payer’s taxpayer identification number used for information returns.
• RECIPIENT’S TIN: Enter the recipient’s full TIN; recipient copies may display only the last four digits for protection, but the full TIN is reported to the IRS.
• RECIPIENT’S Name And Address: Enter the recipient’s full legal name and mailing address, including apartment number, city or town, state or province, country, and ZIP or foreign postal code.
• Account Number (See Instructions): Use if multiple accounts/forms exist for the same recipient so statements can be distinguished.
• 2nd TIN Not.: Check only if the IRS has notified the payer twice within three calendar years that the recipient provided an incorrect TIN.

Line-By-Line Instructions For Boxes 1–7

• Box 1 Nonemployee Compensation: Enter total nonemployee compensation paid; recipients who have self-employment income generally report on Schedule C or F and compute SE tax on Schedule SE, while partnerships report via Form 1065 and Schedule K-1 as applicable.
• Box 2 Payer Made Direct Sales $5,000 Or More: Check this box if the payer sold consumer products totaling $5,000 or more to the recipient for resale; recipients generally report income from such sales on Schedule C when applicable.
• Box 3 Excess Golden Parachute Payments: Enter total excess golden parachute payments subject to a 20% excise tax; recipients follow their return instructions for reporting.
• Box 4 Federal Income Tax Withheld: Enter any backup withholding withheld due to TIN issues or other backup withholding requirements; recipients claim this as federal income tax withheld on their returns.
• Box 5 State Tax Withheld: Enter any state income tax withheld for the recipient; repeat lines for multiple states as necessary.
• Box 6 State/Payer’s State No.: Enter the state abbreviation and the state identification number assigned to the payer by the state revenue agency, matching the state reported with Box 5.
• Box 7 State Income: Enter the amount of state-reportable income corresponding to the state listed for Boxes 5 and 6; repeat for each state as needed.

Instructions For Recipient (What The Recipient Sees)

• Recipient copies may show only the last four digits of the TIN for security, but the issuer provided the full TIN to the IRS; the account number helps match multiple statements to accounts.
• If the amount in Box 1 is self-employment income, individuals generally report it on Schedule C or F and file Schedule SE; if not SE income (for example, sporadic activity or hobby), report on Schedule 1 “Other income” line, and consider estimated taxes via Form 1040-ES when no withholding occurred.

E-Filing Notes And Paper Forms

• If required to e-file due to meeting or exceeding the 10-return threshold, use IRS information return e-file options and current-year specifications; otherwise, order scannable Copy A instead of printing the online red Copy A.
• Publications 1141, 1167, and 1179 provide technical standards for printing and substitutes; official orderable forms and instructions are available at IRS.gov/EmployerForms.

How To File Step By Step

• Gather payer and recipient information, confirm the calendar year, and determine whether any state withholding or multiple-state reporting applies.
• Complete Boxes 1–4 for federal reporting, complete Boxes 5–7 for each state as required, include an account number if multiple statements apply, furnish recipient copies by the deadline, and file Copy A with the IRS by the due date, e-filing if required.