A 1099 NEC form is a document used by the Internal Revenue Service (IRS) to report nonemployee compensation. This form is used to report payments made to freelancers, independent contractors, and other self-employed individuals.
The 1099 NEC form is used for businesses that paid more than $600 in a calendar year to these types of individuals. This threshold is a key factor in determining whether a 1099 NEC form is required.
Businesses that need to file a 1099 NEC form must send a copy to the IRS and to the recipient of the payment by January 31st of each year. This deadline is crucial for both businesses and freelancers to ensure timely reporting and avoid potential penalties.
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What is 1099 NEC
Form 1099-NEC is a tax form that businesses must file when they pay non-employees over a certain threshold.
The threshold for 2025 is $600 and for 2026 it’s $2,000. Farmers, for example, might have to file this form when paying someone to apply pesticide to their crops or repair their fence.
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Businesses must also send a copy of Form 1099-NEC (Copy B) to the recipient of the payment, which is usually an independent contractor.
You might receive copies of Form 1099-NEC from your clients if you provide custom work like repairs, improvements, or consulting services.
The 1099-NEC form is used to report payments to non-employees for federal income tax purposes.
Many states also require this information for state income tax reporting.
Non-employee compensation includes any kind of payment to an independent contractor, such as a freelancer, gig worker, or other self-employed worker.
Form 1099-NEC is a separate form from Form 1099-MISC, which was previously used for this type of tax filing.
The 1099-NEC form is not a replacement for Form 1099-MISC, but rather a different form for reporting non-employee compensation.
Businesses will use Form 1099-NEC to report payments to non-employees, while Form 1099-MISC will continue to be used for other types of payments, such as rents, royalties, and payments to attorneys for legal services.
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Filing Requirements
You need to file a 1099-NEC for each independent contractor if you meet all of the following conditions: the payment was made to someone who is not your employee, the payment was made for services in the course of your trade or business, you paid an individual, single-member LLC, partnership, or LLC taxed as a partnership, and the payments totaled $600 or more during the tax year.
You don't have to file a 1099-NEC for payments to corporations or LLCs taxed as corporations, unless there are exceptions outlined in the IRS Instructions for Form 1099-MISC and 1099-NEC.
To file a 1099-NEC, you'll need the recipient's identifying information, including their name, mailing address, and taxpayer identification number, which you can obtain by giving them a copy of Form W-9.
You'll also need to report the amount of nonemployee compensation paid during the tax year, as well as any federal income tax withheld, which is usually zero unless you're required to follow backup withholding rules for the worker.
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You can find a PDF version of Form 1099-NEC at IRS.gov, but you must use a scannable Copy A, which you can order from the IRS or file electronically using the FIRE system.
Here's a breakdown of the filing deadlines for 2025:
You must provide one copy of the 1099-NEC to the non-employee and one copy to the IRS, and if you paper-file forms, you'll also need to include Form 1096, a cover sheet for submitting information returns to the IRS.
Boxes and Examples
The 1099-NEC form has several boxes that need to be filled out accurately. Box 1 is for nonemployee compensation, which includes payments of $600 or more for services performed by someone who is not a Rowan employee.
The university must report all other forms of compensation for services performed by a vendor. For example, professional service fees, such as fees to attorneys, accountants, architects, contractors, engineers, etc. are reportable.
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Here are some examples of payments that are reportable in Box 1:
- Professional service fees, such as fees to attorneys, accountants, architects, contractors, engineers, etc.
- Payment for services, including payment for parts or materials used to perform the services if supplying the parts or materials was incidental to providing the service.
- A fee paid to a nonemployee, including an independent contractor, or travel reimbursement for which the nonemployee did not account to the payer, if the fee and reimbursement total at least $600.
- Payments to nonemployee entertainers for services.
Some examples of reportable entities include:
- Attorney/law firm providing legal services to Rowan University
- Auto repair
- Consultants
- Independent contractors
- Landscaping
- Office cleaning
- Training
- Transportation
- Printers
- Publishers
- Security services
- Translators & interpreters
Differences and Exceptions
Payments to corporations, including limited liability companies treated as C or S corporations, do not require a Form 1099-NEC.
Form 1099-NEC is specifically for reporting payments to non-employees, while Form 1099-MISC is used for a range of other miscellaneous business payments.
Some payments, such as wages paid to employees, business travel allowances, and payments to tax-exempt organizations, also do not require a Form 1099-NEC.
Here are some key differences between Form 1099-NEC and Form 1099-MISC:
The IRS introduced Form 1099-NEC in 2020 to alleviate confusion and late filing penalties caused by multiple filing deadlines for Form 1099-MISC.
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Employee vs Independent Contractor
An employee is a worker who contributes to your core business in some way, and you're required to file a Form W-2 for each one, withholding payroll taxes and contributing to their health insurance.
You're also responsible for paying workers compensation insurance for your employees. An independent contractor, on the other hand, is self-employed and files a Form 1099-NEC for their income.
In the eyes of the government and the IRS, independent contractors are fundamentally different from employees, and you can't control their hours or work. You're not responsible for withholding taxes or providing health insurance for independent contractors, either.
To file a Form 1099-NEC, you need the contractor's social security number or taxpayer identification number.
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NEC vs. MISC Difference
Form 1099-NEC is specifically designed for reporting non-employee compensation, while Form 1099-MISC is used for a broader range of payments, including rents, royalties, and other miscellaneous income.
The IRS reintroduced Form 1099-NEC in 2020, replacing box 7 on the old 1099-MISC form, to alleviate confusion and late filing penalties.
Before 2020, taxpayers used 1099-MISC to report non-employee compensation, but the IRS created a new form to handle this type of payment specifically.
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The due date for sending Form 1099-MISC to the IRS was February 28 (March 31 if filing electronically), but the PATH Act changed the due date to January 31 if the form included nonemployee compensation in box 7.
Form 1099-MISC is still used for other types of payments, such as rents, royalties, and other miscellaneous income categories.
Businesses use Form 1099-NEC to report nonemployee compensation as well as direct sales of $5,000 or more of consumer products.
Form 1099-NEC is used to report payments to non-employees for federal income tax purposes and is required for payments above a certain threshold, which is $600 for 2025 and $2,000 for 2026.
Form 1099-NEC is different from Form 1099-MISC, which is used for a broader range of payments, including rents, royalties, and other miscellaneous income.
Businesses must file Form 1099-NEC with the IRS and send a copy to the recipient of the payment, which is the non-employee who received the payment.
As a self-employed individual, you should receive a 1099-NEC from any business that paid you at least $600 during the tax year.
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Filling Out the Form
You'll need to obtain the non-employee's information by requesting a Form W-9, which includes their legal name, business entity, address, and Taxpayer Identification Number (TIN).
To fill out the 1099-NEC, you'll need the following information: the business's name, address, phone number, and Federal Employer Identification Number (FEIN), the non-employee's name, address, and Tax Identification Number (TIN) as reported on their Form W-9, state identification number, and non-employee compensation exceeding $600 paid during the previous year.
You'll also need to provide one copy to the non-employee and one copy to the IRS.
Here's a breakdown of the information you'll need to fill out the 1099-NEC:
- Business information: business name, street address, telephone number, and taxpayer identification number
- Payee information: name, mailing address, taxpayer identification number, and account number if applicable
- Amount of nonemployee compensation paid during the tax year
- Federal income tax withheld (usually zero)
- State-specific information, such as state income tax withheld, worker's state identification number, and amount of nonemployee compensation applicable to that state
2025–2026 Reporting Thresholds
The 1099-NEC reporting threshold changed in 2025 and 2026. The old threshold of $600 was replaced by a new threshold of $2,000 in 2026.
For 2025, the threshold was $600. This is the amount that non-employees must receive from a business in order to trigger a 1099-NEC filing.
In 2026, the threshold increased to $2,000. This change was made by the One Big Beautiful Bill Act (OBBBA) in July 2025.
Payments made after December 31, 2025 are subject to the new $2,000 threshold for 2026.
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What Else Do You Need to Know?
Getting a Form W-9 from your contractors and freelancers before issuing payments is a good idea, it helps you collect the necessary information to complete your 1099 tax forms accurately.
You'll need to know the payee's name, address, taxpayer identification number, and business structure, which is all required on the W-9 form.
This information will also help you determine whether you need to file a 1099 NEC or MISC form.
Having everything in order will make tax season less stressful, and you'll be able to file your 1099 tax forms electronically or by mail without any issues.
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Conclusion
A 1099 NEC is a form that's essential for freelancers and independent contractors who work with businesses in the US.
The 1099 NEC is used to report non-employee compensation, which is payments made to freelancers and independent contractors for services rendered.
As we've discussed, the 1099 NEC is a new form, introduced in 2020 to replace the 1096 form, which was used to report miscellaneous income.
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Freelancers and independent contractors who receive payments of $600 or more from a business in a calendar year must receive a 1099 NEC by January 31st of the following year.
This form is critical for tax purposes, as it helps freelancers and independent contractors report their income and calculate their tax liability.
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Frequently Asked Questions
Do you get money back from 1099-NEC?
Typically, no tax refund is received with a 1099-NEC form. However, there may be exceptions, and understanding the specifics can help you navigate your tax situation.
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