IRS Form 1099-NEC 2024

What is Form 1099-NEC? 

Form 1099-NEC, which stands for 1099-Nonemployee Compensation, is a tax form used in the U.S. to report payments made to nonemployees, such as independent contractors, freelancers, and vendors. Employers should provide all nonemployees who earned more than $600 a 1099-NEC.

The 1099-NEC is a relatively new tax filing, introduced in 2020. Before 2020, businesses used Form 1099-MISC to report non-employee compensation.

What is non-employee compensation? 

Very simply, nonemployee compensation refers to any payment made to individuals or entities that are not employees of a business. This typically means payments made to independent contractors, freelancers, or self-employed individuals. 

The payee can be an individual, like a freelance consultant, or an entity, like a contractor operating under a sole proprietorship LLC. 

Who needs to file the 1099-NEC?

Businesses that pay $600 or more to a non-employee within a tax year must file a 1099-NEC for each individual or entity.

What information do I need to file a 1099-NEC?

The 1099-NEC form requires information from both the payer (business) and the recipient (the nonemployee). Here’s what you need:

1. Payer’s information, including name, address, and taxpayer identification number (TIN).
2. Recipient’s information, including name, address, and TIN (for individuals, the TIN is usually the SSN).
3. The total amount of nonemployee compensation paid.
4. Any federal or state income tax withheld.

When is Form 1099-NEC due?

Businesses must submit their 1099-NECs to the IRS and send a copy to the recipient no later than January 31st in the year following the taxable period.

This means if you had a contractor help you design PowerPoint slides on December 28th, 2023, you would need to provide a 1099-NEC by January 31st, 2024. 

If January 31st falls on a weekend or holiday, businesses can send the 1099-NEC by the next business day. 

Failure to submit an accurate 1099-NEC by the deadline can result in penalties.

How to Correct Mistakes on IRS Form 1099-NEC

Mistakes on IRS Form 1099-NEC, such as incorrect payee details, amounts, or taxpayer-identification numbers (TIN), can occur. Correcting these errors promptly is crucial to avoid issues with the IRS. In addition to the corrected 1099-NEC, you must submit Form 1096, which serves as a summary transmittal for all 1099 forms.

Steps to Correct 1099-NEC Errors:

1. For Incorrect Amounts or Payee Information: File a corrected 1099-NEC. Mark the “CORRECTED” checkbox, enter the accurate details, and submit electronically or by mail.
2. Prepare Form 1096: When filing corrections by mail, complete a new Form 1096 with the corrected information. This form reports the total number of corrected 109s and the total compensation amount.

Types of Errors:

• Type 1 Errors: These include incorrect amounts, codes, or payee names (with the correct TIN). File the corrected form with accurate details and include Form 1096 if filing by mail.
• Type 2 Errors: These involve incorrect payer or recipient information (wrong TIN or form type). First, file a corrected form with all zeros to void the original. Then, submit a new 1099 form with accurate details.

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