What Form Do I Need to File for my nonemployee?
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Hiring independent contractors are common practice among many small and large-scale businesses. If your business pays independent contractors to complete services for your company, It is important to understand the reporting requirements when it comes to non-employees. All non-employee compensation should be reported to the IRS using Form 1099-NEC.
What is Form 1099-NEC?
The IRS Form 1099-NEC is also called the non-employee compensation form and is used by businesses and individuals to report payments made to nonemployees such as independent contractors, freelancers, solo proprietors, and self-employed individuals for the services they provided during the calendar year.
Up until the 2020 tax year, non-employee compensation was reported to the IRS using Form 1099-MISC. Because there was a different deadline to file Form 1099-MISC for non-employee compensation (January 31st) as opposed to all other miscellaneous payments (March 31st), the IRS reintroduced Form 1099-NEC to clear up the confusion. The current Form 1099-NEC is based on the original version of the form that the IRS required until 1982.
Who needs to File Form 1099-NEC?
Form 1099-NEC must be filed by businesses and individuals who paid $600 or more to a non-employee during the course of business or trade throughout the calendar year.
The payment includes commission and wages made to employees other than w-2 employees, including independent contractors and other self-employed individuals.
Form 1099-NEC should also be filed if the business withheld federal income tax under the backup withholding rule, even if it was less than $600.
Independent contractors and self-employed individuals will need the information reported on 1099-NEC to complete their Form 1040 (personal tax return).
What information is required to file Form 1099-NEC?
Businesses need to provide the following information to complete Form 1099-NEC
- Business information: Business name, Business Address, TIN.
- Recipient information: Name, Address, Social Security Number.
- Total amount of non-employee paid during the prior year.
- Federal income tax withheld.
- State information.
Deadline to File Form 1099-NEC
Unlike other 1099’s, the IRS 1099-NEC should be sent to the IRS and recipient before January 31st every year. If the deadline falls on a weekend or public holiday, the due date for Form 1099-NEC will move to the next business day.
Businesses and individuals that file late or fail to file with accurate form information can fall subject to IRS penalties. These penalties vary depending on how late the correct form is, here are the potential penalties the IRS could assign.
E-file Form 1099-NEC with TaxBandits
Tax Season is just around the corner, so it is best practice to begin gathering information ahead of time to avoid last-minute chaos and penalties. The IRS generally advises that businesses e-file Form 1099-NEC instead of filing paper copies. E-filing is easier, and more secure, and allows the IRS to manage the volume of forms they receive more efficiently. If you are planning to e-file Form 1099-NEC for 2022 tax year, get started with TaxBandits today. TaxBandits, a market-leading, IRS-authorized e-file provider, offers a simple filing process for many business tax forms, including Forms 1099, 94X, W-2, 1095 & more.
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