IRS Form 1099 NEC - Line-by-Line Instructions - Explained
Updated on September 14, 2023 - 10:30 AM by Admin, TaxBandits
Businesses are required to file form 1099-NEC to the IRS and distribute the recipient copies before the deadline. Here is an overview of Form 1099-NEC Instructions.
The non-employee compensation includes
- Payments made to individuals who are not considered as an employee
- Cash payments for fish purchased from who is in trade or business of catching fish
- Payments made to an attorney
Table of Content:
1. How to fill out 2023 Form 1099-NEC?
Form 1099-NEC contains 15 boxes (fields) including two check boxes. Each box requires certain information with specific to the reporting. Following are the break down of each boxes of IRS Form 1099-NEC instructions and 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)
Completing Box 1 to 7 on Form 1099-NEC
In Box 1 to Box 7, the payer has to report payments made and tax withheld from the recipient
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
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.
Box 3 - Reserved for Future Use
The IRS has left the Box 3 for future use.
Box 4 - Federal Income Tax Withheld
Enter the tax withheld from the payments made to your recipient. This withheld ususally refered as backup withholding and the IRS requires payers to withhold certain percentage of payment from recipient when they fail to provide the right TIN information to the payer.
Boxes 5 to 7
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.
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
Box 7: State income
Enter the amount of the state payment in this line.
2. When is Form 1099-NEC due for 2023?
Form 1099-NEC due date is on January 31, 2024. The payers are also responsible for furnishing a copy of Form 1099-NEC to their recipients by the actual due date (i.e., January 31, 2024).
3. What are the different copies of Form 1099-NEC?
|Payer Copies||Recipient Copies|
Should be filed with the IRS
Should be furnished to the recipients.
To be filed with the state agencies. (Only if required)
To be given to recipients to file with their state income tax return.
Copy for payers to maintain in the business records.
Worried about handling different copies of Form 1099-NEC?
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4. How to file Form 1099-NEC Electronically?
Simply follow the steps mentioned below to file 1099-NEC with the IRS:
- Step 1: Create a free TaxBandits account or Login If you have one already
- Step 2: Enter Form Information
- Step 3: Review Form Information
- Step 4: E-file it with the IRS and State
If you have opted for postal mailing or online access, TaxBandits will deliver copies to your recipients on your behalf.
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