Form 1099-NEC (Nonemployee Compensation)

Any payer (business, nonprofit, government, sole proprietor) that paid $600 or more during the calendar year to a non-corporate recipient for services performed in the course of the payer's trade or business must issue a Form 1099-NEC for that recipient (IRC §6041A reporting threshold, unchanged since the form was reinstated in tax year 2020). Covers independent contractors, freelancers, gig workers, board members, attorneys (Box 1, even if the law firm is a corporation — Treas. Reg. §1.6041-3(p) corporate-exemption carve-out), commissioned non-employee salespeople, fish-purchase cash payments, certain federal executive agency payments. Does NOT cover: payments to C-corps and S-corps (except attorney fees), payments via credit card / debit card / third-party network like PayPal Goods & Services / Stripe / Square (those go on Form 1099-K by the processor under IRC §6050W), wages to W-2 employees (Form W-2), most rent / royalties / prizes / medical payments (Form 1099-MISC).

Form 1099-NEC (reinstated tax year 2020 from the pre-1982 form) reports ONLY nonemployee compensation in Box 1 (payments for services by non-corporate vendors, $600+ threshold under IRC §6041A). Form 1099-MISC reports the catch-all "miscellaneous information": Box 1 rents ($600+), Box 2 royalties ($10+), Box 3 other income ($600+ — prizes, awards, taxable damages), Box 5 fishing-boat proceeds, Box 6 medical and health-care payments ($600+ — including payments to corporations, unlike NEC), Box 8 substitute payments in lieu of dividends or interest, Box 9 crop insurance proceeds, Box 10 gross proceeds paid to an attorney (settlement payments, distinct from attorney-fees-for-services which go on 1099-NEC Box 1), Box 14 nonqualified deferred compensation. Deadlines differ: 1099-NEC is January 31 for both recipient and IRS copies (no extension since 2020), while 1099-MISC is January 31 for recipient but February 28 (paper) / March 31 (e-file) for the IRS copy if Box 8 or Box 10 is filled.

You must apply IRC §3406 backup withholding at the current 24% rate to every payment you make to that recipient until they return a properly completed W-9 with a valid TIN — meaning you withhold 24% of each gross payment and deposit it with the IRS via Form 945 (Annual Return of Withheld Federal Income Tax) on a monthly or semi-weekly schedule depending on your prior-year liability. At year-end, you still issue a Form 1099-NEC for that recipient with Box 1 reporting the full gross compensation and Box 4 reporting the 24% federal income tax withheld. Failure to backup-withhold when required exposes the payer to the underwithheld tax + penalties under IRC §3403 + §6651 + interest. The wizard auto-flags any contractor without a TIN on file and prefills the Box 4 backup withholding amount + the matching Form 945 deposit schedule.

Mandatory e-file if you file 10 or more information returns in aggregate (Form W-2 + 1099-NEC + 1099-MISC + 1099-K + 1098 + 5498 combined) since tax year 2023 — T.D. 9972 / IRC §6011(e) cut the threshold from 250 to 10. You can use either the legacy FIRE System (Filing Information Returns Electronically, requires Transmitter Control Code obtained via IRS Form 4419) or the new IRIS Information Returns Intake System (free, no TCC, web portal + A2A REST API, IRS-preferred). Under 10 returns: paper filing still permitted with the official IRS pre-printed red-ink scannable Copy A + Form 1096 transmittal mailed to the appropriate IRS service center (Austin TX for payers in AL/AR/FL/GA/LA/MS/NC/SC/TN/TX/VA/WV, Kansas City MO for AK/AZ/CA/CO/HI/ID/IL/IN/IA/KS/MI/MN/MO/MT/NE/NV/NM/ND/OK/OR/SD/UT/WA/WI/WY, Ogden UT for CT/DE/DC/IN/ME/MD/MA/NH/NJ/NY/OH/PA/RI/VT). Do NOT print Copy A from the web for paper filing — the IRS rejects non-scannable copies and assesses IRC §6721 penalty.

IRC §6721 late-filing penalties scale by lateness: $60 per form if filed within 30 days of January 31 (max $664,500/yr for large businesses, $232,500 for small biz with ≤$5M gross receipts), $130 per form if filed by August 1 (max $1,993,500 / $664,500), $330 per form if filed after August 1 or not at all (max $3,987,000 / $1,329,000). Intentional disregard: $660 per form with NO maximum cap. IRC §6722 mirror penalty applies to the recipient-statement copy (same scale, stacks with §6721 — so a single late + wrong 1099-NEC can cost $1,320 per form). Wrong TIN triggers the CP2100 / CP2100A B-notice cycle — first notice requires you to solicit a corrected W-9 within 15 business days, second notice requires SSA SSN verification or IRS Letter 147C, third strike triggers mandatory IRC §3406 24% backup withholding. iFillPDF runs IRS e-Services TIN matching BEFORE you file (catches name/TIN mismatches at the W-9 stage) and auto-files corrections via the CORRECTED checkbox workflow per IRS Pub 1220 — eliminating the most common penalty triggers.