What Is a 1099-NEC?
A Form 1099-NEC is a tax form that business owners must issue to independent contractors. Similar to a Form W-2, which is given to regular employees, the 1099-NEC reports the total amount paid to the contractor during the year for services rendered (not goods).
What’s the deadline?
The 1099 deadline (specifically 1099-NEC) is January 31st. You must send all 1099s to the recipients AND file them with the IRS by this deadline. This is a change from previous years, so take note!
What if I paid them with PayPal or credit card?
If you paid an unincorporated vendor using PayPal, credit card, or other third party merchant, the payment service is responsible for reporting this information (usually by issuing a 1099-K). You don’t have to do a thing!
What if I paid them with the PayPal Friends and Family option?
If you paid a person or business via PayPal’s Friends and Family option, you will need to issue a 1099-NEC to them. When you use this method to transfer funds, PayPal assumes it’s a non-business transaction and doesn’t include it in their 1099-K.
What if I paid them with Zelle, Venmo, or CashApp?
If you paid your vendor via cash transfers with providers such as Zelle, Venmo, or CashApp you need to issue them a 1099-NEC.
How do I file a 1099-NEC?
- Make a list of those who meet the qualifications for receiving a 1099-NEC.
- Send them a W-9 to collect their Taxpayer ID Number, address, and business name.
- Create an account with 1099Online.com.
- Create a payer which will be your business information.
- Create the payees. This is everyone who needs to receive a 1099-NEC (Use W-9 info).
- Enter the amount of “nonemployee compensation” each person received.
- Choose the option to have the 1099-NEC mailed to the recipient. Huge time saver.
- File the 1099s after carefully reviewing them.
What happens if I’m supposed to receive a 1099, but don’t?
You should report all income received, whether you receive a 1099-NEC or not. No need to file one for yourself or delay your tax filing if someone doesn’t send you a 1099-NEC or sends you a late one.
What happens if I’m supposed to issue a 1099-NEC, but don’t?
You may have to pay a penalty to the IRS. The amount of the penalty is based on when you file the correct information with the IRS and the contractor.