What happens if I do not file a 1099-NEC?

Updated July 19, 2020

Forgetting to file 1099-NEC could be expensive. Know the 1099-NEC requirements and do not miss the due date.

Providing 1099-NEC to your contractors is equally essential as providing W-2s to your employees. Most businesses have systems in place or use third-party services for payroll processing, and they take care of the year-end W-2 filing. However, generally, there is no proper system in place for 1099-NEC filing. But remember the independent contractors that provide you services during the year need their 1099-NEC form just like employees do their W-2s. Know more about Form 1099-NEC.

You are required to file the 1099-NEC with the IRS and provide a copy to your contractors (recipients); if you fail to do either or both, there are penalties that you may have to face. These penalties increase with time, so you must file as soon as you realize that you forgot to file your 1099-NEC.

Do I need to file Form 1099-NEC?

Let us first check if you need Form 1099-NEC. Here are the requirements, and if you meet one or more of these requirements, you may need to file Form 1099-NEC with the IRS and provide your contractors their copies.

Non-employee compensation is the payment(s) a business makes to non-employee. For 1099-NEC, non-employee payments are reported only if:

  • It is paid to someone who is not an employee.
  • It is made for services in the course of your trade or business. Personal payments are not reportable.
  • It is made to an individual, partnership, estate, or corporation in some cases.
  • The payment is at least $600 for the calendar year.
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    For detailed requirements check out 1099-NEC Filing requirements .

    For more information, please read the IRS instructions for Form 1099-NEC.

    When is Form 1099-NEC due?

    A business must file the 1099-NEC form with the IRS on paper or preferably electronically and must provide a statement to the contractor or individual receiving the payment. You are required to furnish the payee statement to recipients by January 31 and file with the IRS either on paper or electronically.

    How can I file 1099-NEC?

    You can file 1099-NEC with the IRS on paper if you have 250 or fewer forms. However, electronic filing is always preferred. You are also required to provide a payee copy to your recipients. You can provide recipient copies electronically. Check out how to file Form 1099-NEC for more information.

    How long does it take to file a 1099-NEC?

    1099-NEC is a relatively short form to fill out. As long as you have your data ready, you may be able to complete your 1099-NEC in just a few minutes.

    What is more challenging is figuring out how much you paid to each of your contractors, the reason the amount was paid, and where the amount is reported on the form. If you do not collect W-9 from your vendors, it may be time-consuming to obtain their tax id, full legal name, and a valid address.

    We recommend that you collect W-9 form from each of your vendors, before making any payments, to avoid last-minute delays. We also recommend that you use a 1099 online service provider like efile360 to file your forms to save time and money. There are many software packages available in the market that you might want to explore if you're going to do the filing in-house. But remember, if you're going to process 1099-NEC forms in house, you need to mail payee copies as well, which could be very time-consuming. An online service provider takes care of mailing as well as electronic filing.

    Can I get an extension?

    You can request an extension if you realize that you are running out of time to submit before the due date, and the due date has not passed yet. You can get a 30 days extension to file your forms. Getting an extension to furnish payee copies is not straightforward, but possible, by writing to the IRS.

    For more information on 1099 extensions visit, Is it possible to get an extension to file 1099?

    What happens if I miss the deadline?

    The consequence of missing the filing deadline is fine imposed by the IRS. There are late filing penalties. There are penalties for failure to furnish the correct payee statement, and there is a penalty for failure to file electronically. There is also a penalty for intension disregard and fraudulent filing. Find out more about 1099 filing penalties here.

    The late filing penalty is $50 per form if you file within the 30 days of the due date. If you file after 30 days, but before August 1 of the filing year, the penalty is $110 per form. If you file after that or do not file at all, then the penalty is $280 per form.

    If the IRS determines that you have intentionally disregarded the filing, then the penalty is $550 per form. In some cases, the IRS can impose an additional penalty.

    If you are close to the filing deadline and not sure if you would meet the deadline, then it is preferred that you file for an extension. If you have already missed the deadline, then file as soon as possible. Also, prepare early for the next year and make sure you collect W-9 forms from your vendor before making any payments.

    Do you have more questions?

    We are here to help. We provide the most cost-effective 1099 filing services. To know more about our filing service to file 099-MISC, visit eFile360 e-filing service.