Who needs to file Form 1099-NEC?

Updated December 15, 2022

Form 1099-NEC is a new form starting in 2020. Understand who needs to file and how to file Form 1099-NEC.

For each person business has paid during the year, From 1099-NEC: Non-employee compensation must be filed with the IRS. The IRS uses Form 1099-NEC in fighting under-reporting by self-employed individuals. Hiring employers should not take filing Form 1099-NEC lightly, as there could be stiff penalties for failure to file 1099-NEC.

When From 1099-NEC needs to be filed?

If you have paid someone at least $600 during the year in the course of your business, you will need to file Form 1099-NEC. You must file Form 1099-NEC if the payment is for:

  • Service performed by someone who is not your employee.
  • Cash payment made for the purchase of fish or other aquatic life from anyone engaged in the trade of catching fish.
  • Payment to an attorney for attorney’s fees is reportable.

    You must also file Form 1099-NEC for anyone from whom you have withheld any federal income tax, even if the amount withheld is less than $600.

    Report only when payments are made in the course of your trade or business. Personal payments are not reported.

    When is 1099-NEC not needed? Exceptions.

    Some payments are not reportable on Form 1099-NEC, even if those payments may be taxable to the recipients:

  • Generally, payments made to a corporation (including a limited liability company (LLC) that is treated as a C or S corporation) are not reportable. However, payment made to a corporation must be reported on Form 1099-NEC if the payment is made for fish purchases for cash, or for attorney’s fees.
  • Payments made for merchandise, telephone, freight, storage, etc. are not reportable.
  • Payments to real estate agents or property managers are not reportable.
  • Wages, travel allowance paid to employees are not reportable.
  • Payments to tax-exempt organizations or local, state, or federal governments are not reportable.
  • Fees paid to informers as an award do not have to be reported if the payment is made by federal or state government.
  • Scholarship or fellowship grants are not reported on Form 1099-NEC.
  • Difficulty-of-care-payments that are excluded from the recipient’s gross income are not reportable.
  • Canceled debt is not reportable on form 1099-NEC.

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

    Important Note:

    With the introduction of Form 1099-NEC, the non-employees’ compensations are not reported on Form 1099-MISC. Instead form 1099-NEC is used.