Form 1099-NEC: Who Needs to File It, When It’s Due, and What Happens If You Miss It

Form 1099-NEC is for reporting nonemployee compensation for unincorporated businesses that were paid $600 or more during the year. The form must be provided to the recipient and filed with the IRS by January 31. If this date is missed by even one day, automatic penalties will compound based on how late the form is filed.

Form 1099-NEC is likely on your to-do list if you paid a contractor, consultant, or freelancer $600 or more during the year. We offer this service to clients every January, and the same questions are asked every year, like “who is considered a contractor,” “what is the 1099 form deadline,” and “what if the form is filed late?” This article addresses these questions with our professional opinion and based on what we see when we offer this service to our clients who own a business, both in the U.S. and abroad.

Who Needs to File Form 1099-NEC?

If your business paid $600 or more to an individual or an unincorporated entity during the year for the provision of services, then you are obligated to provide a 1099-NEC to that individual or entity. This includes LLCs, sole proprietorships, S-corporations, C-corporations, and partnerships when they hire someone.

There are a few exceptions that confuse people. Payments to corporations are generally exempt from 1099 reporting, except for attorneys, whose fees must be reported regardless of the entity type. If the payment was made by credit card, debit card, or a third-party service like PayPal or Stripe, it is also excluded because those payments are reported on Form 1099-K, which is the payment processor’s responsibility.

Many e-commerce founders we’ve worked with think payments made on Upwork or Fiverr would need a 1099-NEC. Usually, they wouldn’t, because those platforms manage their reporting. However, payments made via direct wire, ACH, or check to freelance developers or designers would need a 1099-NEC.

What Information Do You Need Before You File?

When filing 1099-NECs, you’d need the recipient’s full legal name, address, and Taxpayer Identification Number (TIN). This may be a Social Security Number for an individual, or an Employer Identification Number for a business.

The easiest way to get the information you need to issue a 1099-NEC is to request a Form W-9 and keep it on file. We advise our clients to have contractors sign Form W-9 before any payment is issued. The contractor will be less likely to respond to frantic emails when you request a W-9 in the off-season.

For contractors who are not U.S. persons and are working outside the United States, it is common to collect Form W-8BEN (for individuals) or Form W-8BEN-E (for entities). In these cases, you would not issue a 1099-NEC because the income is not considered U.S.-source. This is a common area of confusion for our clients who reside outside of the U.S. and hire freelance labor.

Form 1099-NEC Deadlines and Filing Methods

This is the most pertinent timeline, and all dates below concern payments made in the preceding calendar year.

Unlike Form 1099-MISC, which includes separate deadlines for paper and electronic filings with the IRS, 1099-NEC has one hard deadline: January 31. For payments made in 2025, the deadline is January 31, 2026. For payments made in 2026, the deadline is January 31, 2027. If January 31 falls on a weekend or holiday, the deadline is the following business day.

Beginning with the 2024 reporting year, the IRS has significantly reduced the electronic filing threshold. If you file 10 or more information returns of any type (not just 1099-NEC) in a calendar year, you must file those returns electronically with the IRS via the IRS FIRE system or through an authorized e-file provider. Small businesses that issue 5 or 6 1099s will likely meet the threshold due to the W-2s and other 1099s issued.

How to File Form 1099-NEC, Step by Step

1. Confirm your contractors are legitimate businesses. Pull the contracting entity’s W-9 and ensure that their entity type is what you recorded.
2. Calculate the total payments to each contractor for the calendar year. You cannot calculate payments for each invoice or project. You must send a form to anyone whom you paid over $600 for the year.
3. Prepare the form using IRS-authorized software or a filing service. IRS-approved red-ink forms can be hand-filled and mailed, but are not commonly used. Tax1099 and Track1099 are examples of IRS-approved form-filing services and cost between $2.99 and $4.99 (as of 2026).
4. Send Copy B to the contractor by January 31. You can send it by mail or secure electronic messaging if the contractor has agreed to receive it in that format.
5. Submit the form to the IRS. You must either electronically submit the form if you are reporting 10 or more contractors, or you must file Form 1096 to the IRS as a paper transmittal
6. Check with your state to determine if there is a separate filing requirement.

Common Mistakes We See With Form 1099-NEC

The biggest and most costly mistake you can make is to forget a contractor. For example, if the founder of the entity paid a freelance bookkeeper $150 for 10 months, that is $1,500. Since no single invoice appears significant, many founders forget to file a form for it. Annual payment totals should be the focus, not the size of each individual payment.

Another common mistake is reporting with the wrong TIN. If a contractor is a sole proprietor and provides their business EIN instead of their SSN (or vice versa, depending on how they filed their taxes), there will be a mismatch in the TIN matching program, and a CP2100 notice will be issued months later.

Businesses also confuse 1099-NEC and 1099-MISC and report nonemployee compensation in box 3 of 1099-MISC, instead of the 1099-NEC. The IRS separated these forms in 2020 to reduce overlap, meaning mistakes involving reporting on the 1099-NEC and 1099-MISC will receive extra scrutiny.

Lastly, a common misconception is that if an LLC is taxed as an S-Corp, payments to the LLC do not require a 1099-NEC. This is not correct. The question is, are you providing the form for payments you made, or for payments you received?

Penalties for Missing the Deadline

When form submission is late, the IRS has a tiered penalty system, and when there are many contractors, the penalties quickly add up.

For accidentally missing five forms and five contractors, the penalty would be $1,650 in total after the August deadline. The penalty for not providing the contractor copies is separate, and the IRS penalty is in addition to that. There is no limit on how much this could cost.

Form 1099-NEC vs Form 1099-MISC vs W-2

These three forms are often confused with one another. W-2 forms are for employees where partial employment taxes are withheld. 1099-NEC is for independent contractors, and 1099-MISC is for non-employee forms and other payments that are not for services.

If you withhold a 1099-NEC and misclassify an employee as a contractor, you now have payroll tax liability and should definitely speak to a tax professional about your options.

Do Non-Resident Founders Need to Worry About 1099-NEC?

We get this question from our non-resident clients with a U.S. LLC as often as we get the question, “Do I need to send myself a 1099-NEC?” The answer is almost always no. Disregarded LLC owners do not issue a 1099-NEC to themselves.

What does it mean when an LLC owned by a non-resident hires a contractor based in the U.S.? The reporting responsibility correlates with the entity making the payment and not the owner’s residency. Say, for example, your U.S. LLC, owned by a non-resident, pays a U.S.-based contractor $2,000 (for example, for a website). You then have a 1099-NEC reporting requirement, regardless of your residency.

State Filing Requirements for 1099-NEC

Some states will require a separate 1099-NEC filing, even if you have filed it for your federal obligations. These states will not participate in the Combined Federal/State Filing Program. California is a state that generally requires direct filing with the California Franchise Tax Board. Pennsylvania has separate requirements that coincide with the federal deadline for 1099-NEC filings on January 31.

If your business operates or has contractors in multiple states, you should research each state’s filing requirements to ensure you are in compliance, even if you filed your federal 1099-NEC.

Frequently Asked Questions

Do I have to report a 1099-NEC if I have paid a contractor in cash?

Yes, you must issue a 1099-NEC for the total payment for services rendered, regardless of the payment method. This must be completed unless payment was made through a third-party payment network that typically would issue a 1099-K.

What if I don’t have the W-9 or TIN for the contractor?

You are still obligated to file. The IRS will allow filing with the info available, though you should seek backup withholding (24%) for future payments if the contractor provides their TIN after you request it.

Is there a threshold number of forms before e-filing becomes mandatory?

In recent tax years, if you are filing a combined total of 10 or more information returns of any type (e.g., 1099s, W-2s, etc.), e-filing will become mandatory.

Can I amend a 1099-NEC after I have submitted it?

Yes, you can file a substitute, mark it as “CORRECTED,” and use the same method (i.e., electronically or on paper) as for the original version.

Must a single-member LLC issue 1099-NECs to other contractors?

Yes. Having Disregarded Entity status does not alter your obligations as a payor. The LLC’s tax classification does not change its requirement to report payments to third parties.

Are you scrambling to organize your filings, collect W-9 forms, verify your contractors’ TINs, and submit filings to federal and state agencies? EasyFiling‘s compliance team provides this service to clients with U.S. businesses in all 50 states and to non-resident founders who have U.S. businesses.