If you’re a business owner in the U.S., tax season brings more than just filing your own returns—it means issuing tax forms to others. One of the most important forms in this process is the 1099-NEC. But who exactly needs to receive a 1099-NEC? If you’re unsure, you’re not alone. This guide will break it down in simple terms so you can stay compliant, avoid penalties, and get back to business.
What Is a 1099-NEC?
The 1099-NEC (Non-Employee Compensation) form is used to report payments made to individuals or businesses who are not your employees, such as freelancers, independent contractors, or service providers.
This form replaced the use of Box 7 on the 1099-MISC in 2020 and is now used exclusively for non-employee compensation reporting.
Who Needs to Receive a 1099-NEC?
As a rule of thumb, you need to send a 1099-NEC if you paid $600 or more during the tax year to:
✔️ Independent Contractors or Freelancers
Anyone you hired for services who is not on your payroll, such as graphic designers, consultants, or web developers.
✔️ Sole Proprietors and Partnerships
If you paid a sole proprietor or partnership entity (not a corporation), they likely qualify.
✔️ Attorneys and Law Firms
Payments for legal services must be reported even if the attorney works through a corporation.
✔️ Vendors or Service Providers
If you paid for things like repair services, cleaning, or maintenance, and the provider isn’t a corporation, they may require a 1099-NEC.
❌ Who Doesn’t Get a 1099-NEC?
- Employees (use a W-2 for them)
- Corporations (most, but not all)
- Online platforms (if you paid through PayPal or a third-party processor, you may not need to issue a 1099)
Key 1099-NEC Requirements for Business Owners
Requirement | Details — | — Payment Threshold | $600 or more per year Deadline to Send to Contractor | January 31 each year Deadline to File with IRS | January 31 (paper or e-file) Filing Method | E-file is highly recommended for speed and security
How to File a 1099-NEC
- Collect a W-9 from every contractor you hire (you’ll need their name, address, and SSN or EIN).
- Use IRS-approved e-filing software or services.
- Submit copies to both the contractor and the IRS before the deadline.
- Retain your records for at least 4 years.
What Happens If You Don’t File?
Failing to file or filing late can result in penalties starting at $60 per form, which can climb quickly if multiple contractors are involved. Intentional disregard can lead to fines of over $500 per form.
Make Tax Season Easier
Tax compliance doesn’t have to be stressful. Platforms like eFileMy1099 help you file forms like the 1099-NEC quickly and accurately—without needing an accountant.
You can generate, e-sign, and e-file IRS forms all in one place—saving time and ensuring peace of mind.
Final Thoughts
If you’re hiring independent contractors, freelancers, or service providers, you likely need to issue a 1099-NEC. Knowing the rules helps you avoid IRS penalties and keep your business running smoothly. Always collect a W-9 upfront and use a reliable e-filing service to stay compliant.
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