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Line by Line IRS Form 1099 NEC Instructions for 2024
Written by Stephanie Glanville
Stephanie Glanville is the Marketing Manager of TaxBandits. She has several years of experience with IRS tax forms and the funtionality of TaxBandits. With a passion to help business owners better understand their IRS tax forms and filing, she aims to create content that is valuable and informative.
Businesses must file Form 1099-NEC with the IRS and provide copies to recipients before the deadline. In this guide, we provide step-by-step instructions to fill out and complete Form 1099-NEC. Read this article for more details on 1099-NEC instructions.
Table of Content:
1. What is Form 1099 NEC?
Form 1099-NEC is an IRS form businesses use to report payments made to non-employees during the tax year. If your business has paid $600 or more in non-employee compensation annually, you must file Form 1099-NEC.
In 2020, the Internal Revenue Service(IRS) brought the Form 1099 NEC back to action, which had not been used since the early 1980s!
The non-employee compensation includes,
- Payments made to someone who is not an employee.
- Payments made for services in the course of trade or business.
- Payments made to an individual, partnership, estate, or corporation.
2. How to fill out 2024 Form 1099-NEC?
Form 1099-NEC contains 15 boxes (fields), including two checkboxes. Each box requires certain information specific to the reporting. By following the 1099 NEC instructions carefully, you can ensure compliance with IRS requirements and avoid potential penalties. Here's the detailed breakdown of each box of IRS Form 1099-NEC, which explains how to fill out each.
Completing Payer Information on Form 1099-NEC
The IRS requires the following payer information on Form 1099-NEC:
- Payer's Name (Business or Individual Name)
- Payer's Address (Street, City, State, Country, ZIP, and Contact No)
- Payer's TIN (EIN or SSN)
Completing Recipient Information on 1099-NEC
The IRS requires the following recipient information on Form 1099-NEC:
- Recipient Name (Business or Individual Name)
- Recipient Address (Street, City, State, Country, ZIP, and Contact No)
- Recipient TIN (EIN or SSN)
Account Number: An account number is required if the payer is filing more than one 1099-NEC and having multiple accounts for a recipient.
Step-by-step 1099 NEC instructions for completing Box 1 to 7
In Box 1 to Box 7, the payer has to report payments made and tax withheld from the recipient
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Box 1 of Form 1099-NEC - Non Employee Compensation
On Box 1, enter the non-employee compensation that you have made to your recipient if it is $600 or more for a calendar year.
What are the types of payments to report under box 1 of Form 1099-NEC?
Box 1 reporting Includes
- Fees, Commissions, Prizes and Awards for services performed as a nonemployee
- Other forms of compensation for services performed for your trade or business by an individual who is not your employee
- Fish purchases for cash
- Oil and gas payments for a working interest, whether or not services are performed.
- Expenses incurred for the use of an entertainment facility that you treat as compensation to a nonemployee
- Federal executive agencies that make payments to vendors for services, including payments to corporations
To learn about payments that are not reported in Box 1 of 1099-NEC, please refer to the IRS Form 1099 NEC instructions.
https://www.irs.gov/instructions/i1099mec#en_US_202401_publink100019858
New to 1099 Reporting?
Learn More about What is Non Employee Compensation in detail and 1099-NEC Deadline.
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Box 2 of Form 1099-NEC - Payer made direct sales totaling $5,000 or more
The IRS has added Box 2 recently to report sales of $5,000 or more of consumer products for resale, on buy-sell, deposit-commission, or any other basis. This was previously reported on Form 1099-MISC. Filers can either report it on Form 1099-NEC box 2 or Form 1099-MISC box 7.
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Box 3 - Reserved for Future Use
The IRS has left the Box 3 for future use.
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Box 4 - Federal Income Tax Withheld
In Box 4, you should enter the amount of federal income tax withheld from payment. If a person has not furnished you with their Taxpayer Identification Number (TIN), they are subject to a 24% backup withholding on payments that must be reported in box 1 of Form 1099-NEC. For more detailed information about backup withholding, you can refer to Part N in the General 1099 NEC Instructions for Certain Information Returns for the current year.
Want to know what is backup withholding?
Learn More about backup withholding in detail and see how it affects your 1099 filing. Also, know how to get your recipient details that are required for 1099 reporting using Form W-9.
Boxes 5 to 7
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Box 5 - State tax withheld
Enter the state tax withholding if it is applicable in your state. You can report payments for up to two states.
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Box 6 - State/Payer’s state no
Enter your state identification number or the abbreviated name of your state. For example, MO - Missouri, MI - Michigan
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Box 7 - State income
Enter the amount of the state payment in this line.
Learn more about 1099-NEC State Filing Requirements.
With TaxBandits you can E-file Form 1099-NEC in few minutes and deliver recipient copies by mail or online. E-File Now
3. When is Form 1099-NEC due for 2024?
Form 1099-NEC must be filed with the IRS by January 31st of the following year, either on paper or electronically. Copies must also be furnished to the recipients by this date. If January 31 falls on a weekend or holiday, the filing should be done on the next business day.
It's important to note that state filisng for Form 1099-NEC deadlines may vary. Check your specific state deadlines to avoid potential penalties.
Here's an overview of the 2024 tax year deadlines for Form 1099-NEC:
| Electronic Filing of Form 1099-NEC | January 31, 2025 |
| Recipient Copy Distribution of Form 1099-NEC | January 31, 2025 |
| Paper Filing of Form 1099-NEC | January 31, 2025 |
- Some states also mandate the 1099-NEC Filing.
- Failing to meet the deadline will result in a huge penalty for Form 1099-NEC. Avoid the IRS penalties, and file 1099-NEC on-time with TaxBandits.
4. What are the different copies of Form 1099-NEC?
| Payer Copies | Recipient Copies |
|---|---|
|
Copy A Should be filed with the IRS |
Copy B Should be furnished to the recipients. |
|
Copy 1 To be filed with the state agencies. (Only if required) |
Copy 2 To be given to recipients to file with their state income tax return. |
Worried about handling different copies of Form 1099-NEC?
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5. How to file Form 1099-NEC Electronically?
The IRS requires 1099-NEC forms to be filed electronically when 10 or more forms. TaxBandits, an IRS authorized e-file provider supporting e-filing for all the 1099, W2, 94x, and ACA Forms.
Simply follow the steps mentioned below to file 1099-NEC with the IRS and State
- Step 1: Create an account in TaxBandits and select Form 1099-NEC
- Step 2: Enter Form Information for 1099-NEC
- Step 3: Review Form 1099 NEC Information
- Step 4: E-file it with the IRS and State
TaxBandits will deliver copies to your recipients through postal mailing or secure online access portal.
Ready to file Form 1099-NEC?
Create a Free Account Now with TaxBandits and E-file 1099 NEC in just a few minutes. Get real time updates about your filing status.
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About the Author
Stephanie Glanville is the Marketing Manager of TaxBandits. She has several years of experience with IRS tax forms and the functionality of TaxBandits. With a passion to help business owners better understand their IRS tax forms and filing, she aims to create content that is valuable and informative.
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