1099 Forms What is 1099-NEC and Its Significance?

Image of Form 1099-NEC 2023

Summary of IRS Form 1099-NEC: A Concise Explanation

The Internal Revenue Service (IRS) frequently updates and modifies the available 1099 tax forms. One significant change in recent times is the reintroduction of Form 1099-NEC, which the IRS initially utilized in the 1980s before being discontinued for several years. The IRS revived this form for the tax year 2020 and onwards. Previously, Form 1099-MISC was employed to report nonemployee compensation, but the form had varying deadlines based on the payment type, creating confusion for taxpayers. To resolve this, all nonemployee compensation is now reported on Form 1099-NEC.

What is IRS Form 1099 NEC?

IRS Form 1099-NEC is utilized to report nonemployee compensation. A Form 1099-NEC should be completed for each individual:

  • To whom you paid at least $600 during the course of business during the year for:
    • Services performed by someone who is not an employee (including parts and materials), or
    • Payments to an attorney.
  • From whom you have withheld any federal income tax under backup withholding rules, regardless of the amount of payment.

Note: 1099-NEC and 1099-MISC can be used to report sales totaling $5,000 or more of consumer products to a person on a buy-sell, deposit-commission, or other commission basis for resale.

Until the tax year 2019, nonemployee compensation was reported on Form 1099-MISC in Box 7.   However, from 2020 onwards, it should be reported separately on Form 1099-NEC.

Why did the IRS reintroduce Form 1099-NEC?

In reality, the 1099-NEC is not a new form. It was active until 1982 and has now returned to prominence after the tax year 2020.

The IRS brought back the 1099-NEC form to resolve the ambiguity surrounding the filing deadline for 1099-MISC with nonemployee compensation. Prior to 2015, the due date for submitting 1099 MISC, which included nonemployee compensation and other miscellaneous payments, was February 28th.

In 2015, the enactment of the Protecting Americans from Tax Hikes Act (PATH Act) altered the deadline to January 31st, specifically for filing 1099-MISC with nonemployee compensation.

Before the tax year 2020, payers who used 1099-MISC to report miscellaneous payments were required to submit the form to the IRS by January 31st. If 1099-MISC was employed to report payments other than nonemployee compensation, the submission deadline was February 28th for paper filing and March 31st for electronic filing.

The presence of two distinct deadlines for the same form led to confusion among payers and vendors. In fact, the IRS regarded returns as late if they were received after January 31st. To eliminate this ambiguity, the IRS opted to reintroduce the 1099-NEC. This decision has provided clarity for payers, vendors, and the IRS alike. Consequently, payers can now decide whether to file 1099 NEC or file 1099-MISC based on their reportable payments for tax years beyond 2020.

Who is Required to File Form 1099-NEC?

Form 1099-NEC is mandatory if the payment fulfills any of the following criteria:

  • Payments of $600 or more made to someone who is not an employee (including parts and materials)
  • Payments made of $600 or more to an attorney
  • You have withheld any federal income tax under backup withholding rules, regardless of the amount of payment.

Note: A 1099-NEC may also be used to report sales totaling $5,000 or more of consumer products to a person on a buy-sell, deposit-commission, or other commission basis for resale.

What is the deadline for filing Form 1099-NEC with the IRS?

  • January 31st, 2024
    Recipient Copies/Paper/E-file

    Form 1099s must be distributed by the employer to the recipient on or before January 31st

Note: If the filing deadline lands on a Saturday, Sunday, or legal holiday, the due date will automatically be extended to the following business day.

Visit our deadlines article to learn more about Form 1099 due dates.

Most states also have a filing deadline of January 31st, but some may vary. View our state deadlines post to learn more about the state filing deadlines.

What are the different Form 1099 Copies?

Each Form 1099 has five different copies with their specific purpose:

Copy A

IRS copy for paper filing.

Copy 1

Filed with the State Tax Department.

Copy B

Recipient copy.

Copy 2

Recipient state copy used for state income tax reporting.

Copy C

Payer's copy for their records.

Get started with , and file your 1099 tax forms with federal/state and mail recipient copies from one place. BoomTax will never remove past years' filings, and you can continue to make corrections at any time, no matter the year. File my Now!

How to E-file Form 1099-NEC?

E-file your Form 1099-NEC with the IRS and the necessary state using BoomTax, an IRS-approved e-file provider that supports e-filing for all 1099 Forms, W2, and ACA Forms.

Import Your Form 1099-NEC Data

You can import your data as Excel, XML, or use files from popular payroll providers like QuickBooks, UKG, ADP, and many more.

Step-By-Step Wizard

We walk you through the process with no complicated jargon. You can also live chat with a real person as you work on your filing for hands-on help.

E-File & Mail Employee Copies

Once your data is loaded, you can e-file and distribute employee copies in minutes.

There is no additional fee for filing prior-year 1099 tax forms with BoomTax; you can e-file at the same affordable rate as current-year forms.

What is the Penalty for Missing Form 1099 Deadline?

Failing to file Form 1099 by the deadline or meeting the deadline but providing incorrect recipient information can result in IRS penalties ranging from $60 to $630, depending on how late the form is submitted. The IRS has increased the penalty amounts for the 2024 filing year.

After the deadline, but within 30 days

$60 per form

After 31 days - August 1st

$120 per form

After August 1st, or not at all

$310 per form

Intentionally not filing

$630 per form

1099 penalties may be subject to the following:

  • Furnishing incorrect information on a return
  • Failure to provide the required information
  • Late filing of returns
  • Paper filing when required to file electronically (E-file 1099 if you have 10 or more information returns)

The IRS is accustomed to changing rules year-to-year, sometimes even in the middle of the current tax season! This is why having the most accurate information about the IRS requirements and deadlines for filing any Form 1099 is essential. Use reliable tax software to e-file your forms and stay updated on any changes in regulations or deadlines.

E-filing vs. Paper Filing

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  • Immediate real-time IRS updates
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Paper Filing

  • It can take weeks to hear a status update
  • Requires unique red ink form
  • Prone to human error
  • No expert to help with questions

Note: IRS recommends that payers utilize the e-file option over paper filing for faster processing.

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