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How to Correctly File a 1099-NEC Form
I know, it’s THAT time of the year again… tax season.
Many of you have hired independent contractors over the course of last year, and if that’s the case, then you need to ensure you file 1099-NEC forms with the IRS. What this means is that you have to report to the federal government and (most likely) state government that you paid someone for work performed that wasn’t an employee–aka “non-employee compensation” or “NEC”.
Here is the easy three step process for you to determine if you need to file a 1099:
- Is the person working for you and not an employee?
- Have they made over $600 from you in the last calendar year via direct deposit, check, cash, or bank-to-bank transfer? (If you paid them through their invoice sent to you online–so through Stripe/Square/PayPal, etc.–then you do not need to send them a 1099.)
- Is this person an individual/sole proprietor, or is the entity partnership, Limited Liability Company (LLC), Limited Partnership (LP), or estate?
If you answered YES to all three, then you need to fill out and file 1099-NEC forms for each contractor.
Now, I know a lot of you have been online researching and attempting to figure out the best way to file these. First off, don’t stress yourself out. These forms can be done easily through an online website. Second, if you are still stressed out, your accountant can do these for you in a jiffy and will file them for you, which is extra awesome if you’re short on time. Finally, remember that the IRS is your best resource for current and truthful information, so don’t believe everything you read online about 1099s. Here is a GREAT page on the IRS website that really explains everything.
Here are the steps to file a 1099-NEC form:
- Either use a site such as 1099online.com or payroll.intuit.com
- Enter information about your company (EIN, address, contact info, etc.)
- Enter individual information about your contractors (you’ll need their SSN, address, and total amount earned)
- Helpful hint: Have a W9 Form immediately available when you hire an independent contractor to ensure you have this information at the beginning of your relationship, or simply send them a W9 at the beginning of the year to ensure your records are up to date.
- Pay a small fee to complete the forms which will be sent to the IRS.
- Save a PDF or print a copy for your records.
- Email or mail a copy of the 1099-NEC form to each of your contractors and ask them to verify the information
- After making any corrections from contractors, submit them to the IRS by January 31.
Again, just in case you forgot, here are two great websites to use for filing your 1099:
THIS BLOG POST IS NOT A SUBSTITUTE FOR LEGAL ADVICE. EVERY SITUATION IS DIFFERENT & IS FACT-SPECIFIC. A proper legal analysis is necessary based on your location and contract. Consult an attorney in your home state for advice regarding your contract or specific legal situation.