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!
Who Should Receive Form 1099-NEC? Take the Quiz!
If you paid $600 or more to an unincorporated person or vendor for services related to your business using cash, check, or bank transfer (ACH) you need to issue them a 1099-NEC.
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.
I have one person whom I paid $300 via PayPal and $300 via check. I’m assuming I should still issue her a 1099?
Great question – you actually won’t need to issue a 1099 since only $300 was paid via check and the rest with PayPal.
What do if the date is 3/2/15 and you’re just realizing all of this? I can get the w-9 quickly, but can I still send one to the vendor and the IRS by EOD?
If using 1099online.com, you can email your vendor the 1099 once you’ve completed the 1099 form. Then, once you’ve submitted it, USUALLY that’s the date recognized by the IRS so you shouldn’t face any penalties.
Hope that helps!
What if the payee is outside of the U.S. (i.e. Canada or elsewhere)? Are there special forms I might need to complete for an international service relationship for something like virtual assisting, graphic design, etc? Thank you!
Great question! As long as the contractor is a non-US citizen and performed all work outside of the United States, then you don’t need to issue a 1099. The formal way of requesting that info is by using Form W-8BEN. They would need to fill out part 1 and part 3 of the form if you paid them over $600. You would hang on to the form for your records in case you were ever audited.
What about paying an independent contractor using the square cash app thus using my debit card to pay them? Do I still need to file a 1099-misc for that contractor? THANKS SO MUCH Amy!!! I recommend you and your services everywhere!
Since you’re paying through Square, that counts as a merchant processor (like PayPal) and you wouldn’t need to issue a 1099.
Thanks for the recommendations 🙂
Thank so much thank you for the info. I’m unclear about how paying via Square Cash or Paypal means no 1099 needs to be issued. Further what about using Venmo?
Great question Shelly! Credit card companies and payment processors (PayPal, Square, etc) take care of reporting the electronic payments to the IRS.
Thanks for the info. Makes me think going forward I should pay all my contractors and rent via a payment processor, then no 1099s need to be issued.
Yep, that is an option to cut down on work for yourself!
Great question, Shelly! And, Amy, I’d like to clarify something, too, since I paid one of my contractors using PayPal but not using the Business option, I chose Friends & Family so as to avoid the fees, and the other contractor with my personal credit card, is it still the case that I do not need to issue a 1099 for either one? And if that is the case, is there anything I am to do to somehow claim this or do I simply need the proof of these payments when I go to submit my own taxes?
Payments made through PayPal’s friends and family option aren’t reported through the payment processor, so you’ll need to issue them a 1099. You won’t need to issue one for the payment made with your credit card. Include these payments as regular expenses and keep on hand verification of those payments (email receipts, etc).
Hello Amy, wanted to ask a question with respect to this. If a payment was made through Venmo for services but through a bank account (not credit card) would a 1099 need to be filed by me, or will this come from Venmo? Thank you in advance for your help.
According to Venmo’s support, they don’t consider themselves as a merchant processor, so they don’t issue 1099s themselves. Because of that, you will need to include Venmo payments when coming up with the total payments to report on 1099s.
What about payments made via venmo using a credit card (as opposed to debit or bank transfer)? Do I need to do a 1099 then?
According to Venmo, they do not support merchant payments and therefor do not issue 1099s. In this case, you would need to issue a 1099.
If you don’t file 1099s, and leave it to them to report (and you’re both okay with that) will you get in trouble?
If you were audited and the IRS found out that you didn’t submit the 1099s that you’re required to file, you could be assessed a fine of $100 per form not filed.
Hi Amy! Thanks for posting this (and thanks to Melissa for sharing it on Facebook today)!!
If I did over $600 of work for a company, but I’m registered as an LLC, do they still owe me a 1099?
Hi Jenna – If you’re a single-owner LLC and file your business taxes on a Schedule C, then they would owe you a 1099.
Love this post! So helpful! Thanks Amy!!! YOU KNOW EVERYTHING!!
Yay! Thanks Kristen 🙂
Just to clarify, this is just for *services*? If, for example, I buy a item for my business, that’s different? I bought a computer for business use from my BIL. ($1200) He’s not a business, he sold it to me as an individual, but I plan to count is as a deductible expense. Do I still 1099 him?
Also: since he’s not a business, he didn’t charge me sales tax, obviously. So, would I (my gut says I gotta pay Michigan SOMETHING haha. But he wouldn’t charge sales tax since he’s not a business… so I’m left with use tax…? Blah!)
Yes! That’s correct – just for services.
If you didn’t pay sales tax, Michigan will definitely want you to pay them some Use Tax. It’s a bummer, but better to pay it than to possibly get audited and pay fees/interest in addition to the tax!
I *just* sent in my payment, sans the amount due for the computer. 🙁 Should I do something to correct the amount then? Or would it be terrible if I paid it in the next quarter?
..or is it as simple as just making one more payment for the “missing” amount…? (I pay online if this matters, and there doesn’t seem to be an option for corrections)
Oops, I did find the amend options. 🙂 I just have to wait for the first payment to process first, of course. For others in Michigan who may need to know, current instructions are found here: http://michigan.gov/documents/taxes/MTO_Optimization_Learning_Series_10_Amending_and_Pay_a_SUW_Tax_Return_510259_7.pdf
I brought a lens from a individual, paid via check and didn’t pay sales tax. I think this is similar to what you were saying about your computer purchase. I wouldn’t 1099 the lens seller, but need to pay the use tax to my state (CA).
Did I get that right Amy?
That’s correct Shelly!
Oh good, I’m glad you found it Heather!
What’s recommended for sole-proprietors whose (individuals or SMALL biz) clients pay via check?
When they don’t know about providing 1099s is it on the service provider to educate them about 1099s and the process? Should that be a part of the job/contract process?
Great question! It’s completely on them to know the rules of owning a business and filing the 1099s. You would never be penalized for not receiving one. You’re welcome to educate them, but I wouldn’t make extra work for yourself 🙂
I started a job earlier this year as a independent (sub) contractor, and just received my 1099 misc form. Since I am new to this 1099 form, I am kind of lost on how to go about filing. I am not married, but have three children that live with me. What are the steps I should take if I plan to file for a return?
If you have expenses related to your independent contractor income, you’ll file your regular tax return (1040) but you’ll also file a Schedule C form which is where you’ll report the contractor income and related expenses. If you use a program like TurboTax, they will walk you through all applicable deductions.
If you don’t have any related expenses, then you can report the income as “other income” on your 1040 tax return and skip the Schedule C form.
Similar to Jenna’s question, if you’re a Sole Proproprietor and file my taxes on a Schedule C, then they would also owe me a 1099, as well, yes?
Thank you – great post!
Yep, that’s correct! But it’s up to them to send it. As long as you report all the income you received, you don’t need to wait for 1099s to be issued to you.
Thanks for the great article!
You mention that the 1099 deadline (specifically 1099-MISC) is February 1st, 2016 to send 1099s to recipients. I have this part covered. The part I’m confused about is, “The deadline for filing 1099s with the IRS is February 29, 2016 if you file paper forms or March 31 if you file them electronically.”. Does that mean I need to file all my taxes by those dates instead of April 15?
I probably need to word that better. The deadline for sending the recipient copy of the 1099 to the recipient (only) is Feb. 1st. The rest of the copies will be filed (by themselves and not with your actual tax return) by February 29th (or March 31 if filed electronically). You still have until April 15 to file your annual income taxes.
Oh, ok, gotcha! Thanks so much for clarifying! And thanks again for such a great article! 🙂
Hey Amy. I have a situation where I performed work in November 2015 and was issued a check. I never received the check and had the company reissue it. The check was voided and reissued in January 2016. The check was received and deposited shortly after. Should I record this as income in 2015 or 2016?
Thanks for your help!
Hi Jeff – If your business operates on the cash basis (most small businesses do), you’ll report the income based on when you actually had the money in your account (2016). Just make sure that they don’t issue you a 1099 showing 2015 income of this amount.
Odd question probably…I was dating a guy who gifted me about $1200 over the last year to pay for my race fees, etc. (I’m an athlete). Anyway, we broke up in January and it was kind of ugly. He said he was filing a 1099 since he gifted that money through his business (which I was unaware of) to “get me back” and he wanted to write that money off, which seems to me is fraud. Anyway, I never filled out a w-9 or received a 1099, but I’m not sure what to do. I don’t want to get in trouble with the IRS if he does actually file it even though I thought it was a gift, not income. He didn’t have any of my information either except my name and I guess my address and phone number. He may not have even done anything, but I don’t want to be in trouble.
Thanks so much
Hi Dee – If he does file the 1099, you should receive a copy so you’ll know whether or not he files it. If you do receive the 1099, I would recommend contacting a tax attorney who can guide you through the process of disputing the 1099.
If I pay a person/subcontractors to their birth name and social security ( not a llc or business), have them fill out a w9,
Pay with my company checks, and send out the 1099 form at end of year. Then they do not file taxes, am I still good for writing off the expense and not being responsible for the tax?
What is my best options?
Hi Jeremy – Yes, you are not responsible for the other party and whether or not they pay taxes.
If a vendor was paid with checks for the first half of the year and then agrees to be paid via a VCN (virtual credit card number) going forward, should the 1099 that is issued the following year only include the amounts paid with a check or since they agreed to be paid with a VCN (virtual credit card number), does a 1099 need to be issued at all for that year? For example, they were paid $700 with a check and then paid $800 with a VCN. Should I issue a 1099 in the amount of $700.00 in order to report the payment made by check? Or is no 1099 needed because they are now accepting payments via a VCN? Thanks for your help.
You would issue the 1099 for the amount paid through checks. So for your example, you would issue the 1099 for the $700.
If I made several payments totaling more than $600, should I file them all separately or may I do it all at once?
Viji – you will combine all payments and report the total for each individual person/business’s 1099.
I looked through the comments, and apologize if this has already been answered! I was a contracted second shooter for different photographers this year (and they made the checks out to my personal name, rather than my LLC). I was paid over $600 from one photographer (two separate weddings) but the others I worked for, I made less than $600 from each of them. Do I report absolutely everything that earned (from every photographer that I worked for) or just the instances where it totaled more than $600 from a specific photographer? Sorry for any confusion.
You will report all income received, whether it was reported on a 1099 or not 🙂
If I an not sure about whether a business is an LLC or incorporated since they didn’t fill out a W-9 and are not returning my calls, and I send them a 1099. What happens if I am wrong and should not have sent one?
Nothing will happen. Just keep documentation that you tried to reach out to them to get the necessary info. Better to file a 1099 that didn’t need to be filed than to not file it.
If you are paying a vendor an advance prior to year end for next January 2017, should the amount paid be included in the 2016 1099?
Yes! Since the money left your pocket in 2016, you’ll need to report it on a 2016 1099.
I have a real estate agent that gets 1099’d for real estate related sales and leases. She also is a virtual assistant for my office and works remotely on various projects regularly and also works for other companies as a virtual assistant. Should I combine the two amounts into one 1099 or should I send her two 1099’s?
Hi Ann – If both payments are made from your one business, you should combine the two amounts since they’re both reported in box 7 (Nonemployee Compensation) of the 1099-MISC form.
What about you hire a second shooter and stick with them for the duration of the year? Would you be sending them a 1099 if I paid them by cash, check, or bank transfer?
If you paid them $600 or more over the course of the year via cash, check or bank transfer, you’ll need to issue them a 1099. It doesn’t matter if you used them once or several times throughout the year.
I purchased some photography equipment from someone on Craigslist by cash for $800 last year. I’m assuming from this article that I need to pay use tax, but of course I don’t have any information for them, including name, address, anything. What do I do in this case?
Hi Crystal – If you purchased equipment and didn’t pay sales tax, you will need to pay Use Tax to your state. That will be different than a 1099-MISC and you shouldn’t need their info to report it to your state.
Just for clarification purposes, do debit cards count the same as credit cards?
I have two hair and makeup artists that I pay at each session we work on together. For 2016 I paid them via my Paypal debit card using their card swipers on their phone. For 2017 I’ll be using my bank debit card.
I assume based on what you’ve said above, that I would be covered since I’m using a card through their card swiper>
Hi Jess – Debit cards do count the same as credit cards. You are correct that you wouldn’t need to worry about a 1099 since you paid via PayPal/debit/credit card.
Hi Amy, great article! Not sure if my last question went through so I’m reposting. My question is around vendors who I pay on behalf of my clients. For example, I hired a sound company on behalf of my client for their event, I paid the sound company with a personal check and was then reimbursed by my client. Should I be sending the sound company a 1099?
Hi Sophia – Since you were the one paying the vendors, you will be responsible for issuing 1099s if the payments meet the requirements.
Hi Amy, If we made a $1000 payment to a vendor by check on December 20, 2016. If that check was voided on January 15, 2017 and a new check was issued. In what year does the payment need to be reflected on a 1099?
Since the money didn’t come out of your account until 2017, it will be reported on a 2017 1099-MISC.
What if we cut a check prior to December and it was for contractor services in January. Contractor was not given check until January. We then issued 1099 the year check was cut. Do we need to amend 1099? 1099 was generated from accounting software based on when the check are cut. Thanks.
If you held onto it until the next year and they didn’t have the ability to cash it until the next year, it should be included in the following year’s 1099.
From the contractor standpoint, they technically shouldn’t have to report income for a year they didn’t even have access to the funds in.
Hope that helps!
Hi there! I have charged some customers through Square and others through PayPal. If neither one of them equal up to $20,000 separately but are more than $20,000 combined, do I still need to sumbit this to the IRS? Thank you!
Hi Abby! It won’t matter if it adds up to $20k combined or separately. If you paid them through a merchant processor, you don’t need to issue a 1099.
As a contractor, I did part time work for some client company and received a check of $ 1100 for that work.
I later realized that I am legally not allowed to do part time work in the first place.
I am planning to not encash that check so as to not get into legal issues.
In this case can the client company still issue me 1099-MISC for the check they have drawn.
They can still issue you a 1099 so I’d go back to the company and ask them to cancel the check so they don’t issue you a 1099 for that amount.
my consultant rendered service to me but asked me to make the payment to a third party. should i issue the 1099 to my consultant or the third party?
According to the instructions for form 1099-MISC, the 1099 should be issued to the recipient of the funds.
Not sure if this has already been answered but we are staffing agency and we have third party vendors paid via check or ACH, should I issue them all 1099-MISC regardless what type of business or do I have to consider their type of business and issue 1099 to those SP,P, LLC/LLP etc.
You will need to consider what type of business they have. In order to determine that, the vendors will need to fill out a W-9 form where they’ll select which business structure they have.
Q: on this same topic…
Im a 1099 to a small consulting company. However, they recently asked me to pick up some expenses for them and they will reimburse me for those expenses. Will this expense be part of my 1099 or will it be treated as a reimbursed expense?
just to add further… I am not a company – I’m self employed in CA. I took on 2 payments on behalf of my contractor: One was over $5,000 and was in UK/London and other was under $5,000 in USA and both were paid using my credit card.
Will the contracting company I’m working with simply reimburse me or will they add these amount to my 1099 at the end of the year? If they add to my 1099, how then do I let the IRS know it is not income or wages?
If you’ve supplied documentation (ex: receipts, email confirmations, etc) to the company for the expenses and bill them as a separate line item on the invoice, they should exclude the reimbursements from your 1099.
If you just bill them one lump sum and don’t supply them with receipts/documentation, they will include the entire amount on the 1099.
Either way, the tax ends up the same so I wouldn’t be too concerned. If you spend $10k in expenses and they report that $10k as income, you will still net $0 taxable income.
I’m a subcontractor and have been working for the same client for years. In the past several years he has given me a ‘holiday bonus’ in December and I have been including that in my 1099 income and paying tax on it. But I’m wondering if it should be counted as income since it was a gift and not earned? Thanks!
Hi Kathy – Unfortunately you will need to continue paying tax on that bonus amount. If you were an employee and receiving a W-2, the bonus would be included in your gross wages.
[…] is not a U.S. taxpayer, and all of the contracted services were performed outside the U.S., a Form 1099 is not required. Instead, you will need to ask the contractor to complete a Form W-8BEN. […]
[…] a sole proprietor and don’t mind giving out your social security number when it’s requested for 1099 forms. You’ll be asked for your social security number for the 1099 form if you provided services and […]
Your website is very informative. THANK YOU!
I have a question regarding 1099s if you don’t mind. I pay people through Paypal using the family and friends transfer (not goods and services) with my debit card. Do I need to issue a 1099?
Thank you and I look forward to hearing back from you.
If you selected the ‘friends and family’ option through PayPal, you will need to issue a 1099. The friends and family option doesn’t take fees out, so it’s essentially an ACH transaction (bank to bank) and doesn’t get reported to the IRS by PayPal.
Hi Amy, I’ve got a new LLC that has rented land from individuals. I’ve paid the lessors over $600 each. The lessors are ‘etal’ or man and wife. I’ve collected name, address and SSN for each. 1099-misc asks for payee SSN. What SSN should I put in that box, one or both? Thanks much
Hi Red – There will only be space for one SSN on the 1099-MISC form, so you’ll only be able to list one.
I recently started helping a new start up company that is an LLC for Youth Sports. We rent space during the winter for indoor practices occasionally. It it usually a daily rental of a gym or open area for a specific date/time. Would this be considered Rental Expense that I would then 1099 them on for Rent Expense? We also, pay fees to a facility that we play games at on the weekend, is that more of a league fee to us or a rental expense that I should be issuing a 1099 on. My gut tells me that i should not for the games, etc but possibly might for the use of their indoor gym space through the winter.
Hi Tracie – I agree that the daily rental of the gym would fall into rent and the fees you pay to play on the weekend are more like league fees.
We have two subcontractors who refuse to complete their W-9 forms and provide their TIN’s. Also, they were paid in cash and did not provide receipts. The amounts are small, about $650 and $1500. Do you have any advice about what we should do? If we file the 1099’s with the information we have, without the TIN’s, could this trigger an audit of both the subcontractors and us? Can we compile a log right now detailing the cash payments to these vendors as supporting evidence of the payments?
If a subcontractor refuses to provide a TIN, you (the business) should immediately begin backup withholding, at the rate of 28%, on any reportable payments made to the payee (and remit this amount to the IRS). You should also make up to three solicitations to the payee for the payee’s TIN, in order to avoid a penalty for failing to include a TIN on the Form 1099 information return filed by the business. If the vendor refuses to provide their taxpayer identification number, the business should still fill out and timely file its 1099 information return(s) with a notation that the payee failed or refused to provide their taxpayer identification number.
To resolve this issue in the future, here are my recommendations:
If we sent an ACH on 12/29/17, and the vendor only received the funds on 1/2/18 would that payment still go on their 2017 1099 form? Because technically we paid them in 2017? Or it should go on 2018 1099 form?
Thank you so much!
If the money actually comes out of your account in 2017, you’ll include it on the 2017 1099 form.
Are payments made to an accounting firm using a credit card reportable on 1099-Misc?
If you paid a vendor using a credit card the payment service is responsible for reporting this information (usually by issuing a 1099-K). Most likely the firm is an incorporated vendor, so you would not need to issue them a 1099 anyway.
Hi Michael – since a credit card is considered a merchant processor, any payments made via credit card should be left off the 1099.
Saw an old post by venmo support via twitter. ( I actually liked it) back from 2014. It states that venmo does not report a 1099k. It is the users responsibility to report taxes. I want to make sure my 1099k matches with what I reporting. Thoughts?
Since Venmo doesn’t issue 1099-K forms, you won’t need to worry about matching the amounts received via Venmo with income on your tax return. Just be sure you report all business income and you’ll be good to go.
I collected alot of funds through venmo. For alot events with friends, traveling with friends, collecting for parties, paying for tickets to sporting events, etc. People also paid me for my services on my personal venmo. I plan on reporting that income. But my transactions are well over 200 trans and over 20K. Will venmo issue a 1099k? Also, how will the IRS be able to distinguish whats income and non?
Hi Jay – Venmo is a form of ACH, so they will not issue you a 1099-K form. Venmo is not reporting any info to the IRS on your behalf.
This post answered my EXACT question and I can not thank you enough!!!
Thanks for the info. I’m getting conflicting information from the IRS. The lady I spoke to (and I did mention that I paid my makeup artist via PayPal) said that I need to submit the info for the 1099 anyway. I looked up the info on the PayPal website and they don’t issue a 1099-k unless the business grosses over $20k AND receives over 200 payments. I’m so confused.
According to the 1099-MISC instructions (pg 2, section 1099-K), payments made through a third-party network (PayPal) should be excluded from 1099-MISC.
Here’s a link to the instructions: https://www.irs.gov/pub/irs-pdf/i1099msc.pdf
I have an S corporation ( and this is my second year on this so I’m new) now my CPA asking me that he need the total of my income of 2017 run through my EIN number instead of my social security number before January 31….. I did this last year, do I have to do it every year? that my question, Thanks in advance for your time.
You’ll want to clarify this with the CPA preparing your taxes. Sorry I can’t be of more assistance.
Hi Amy! Question: would payments to a Virtual Assistant company (for example, a monthly subscription to Red Butler or similar) fall under the 1099-MISC category?
(Being a recurring subscription, it’s billed on a company credit card, so I assume it’s a moot point. But, I’m curious to know if that type of service would be applicable if the payment had been made by another method.)
Hi Katherine – sorry for the delay as I worked to wrap up tax season. Since you paid via credit card you will not need to issue a 1099-MISC. If you were to pay a Virtual Assistant via cash, check, or bank transfer (ACH) you need to issue them a 1099-MISC.
If I received a 1099 form because Spectrum discounted my internet and TV for 924 dollars regardless that I payed each month what was asked and was never told this would cost me taxes at the end of the year, am I responsibile to pay taxes on this amount
Hi Carol – if you receive a 1099 you are responsible for reporting the income on your tax return. A copy of the 1099 issued is reported directly to the IRS, and they will know if you did not report the income. If the information on the 1099 is incorrect then you need to reach out to the company that issued the form and have them reissue a corrected 1099.