IRS Form 1099 NEC - Line by Line Instructions - Explained

Updated on August 29, 2022 - 10:30 AM by Admin, TaxBandits

Form 1099-NEC is an information return that is used to report non-employee compensation to
the IRS.

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

In this article, we cover the following topics:

1. What’s new on Form 1099 NEC for 2022?

The IRS has made some changes to the 2021 tax year Form 1099-NEC. The changes includes 3 field level changes (on box 1, box 2, and FATCA check box).

  • Box 1 - Will not be used for reporting cash payments for the purchase of fish for resale purposes under section 6050R.
  • Box 2 - Added newly to report sales of $5,000 or more of consumer products for resale, on buy-sell, deposit commission, or any other basis.
  • FATCA - The IRS has removed this check box from the Form 1099-NEC which was available for the 2020 tax year.

Want to file Form 1099-NEC?

Learn More about the 1099-NEC changes for the 2021 tax year in detail.
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2. How to fill out 2022 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 and explains how to fill out each.

Form 1099-Nec

Completing Payer Information on Form 1099-NEC

2021 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

2021 Form 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.

Form 1099-Nec

Completing Box 1 to 7 on Form 1099-NEC

2021 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

2021 Form 1099-NEC

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.

Form 1099-Nec

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

New to 1099 Reporting?

Learn More about What is Non Employee Compensation in detail and 1099-NEC Deadline.

Box 2 of Form 1099-NEC - Payer made direct sales totaling $5,000 or more

2021 Form 1099-NEC

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

2021 Form 1099-NEC

The IRS has left the Box 3 for future use.

Box 4 - Federal Income Tax Withheld

2021 Form 1099-NEC

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.

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

2021 Form 1099-NEC

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.

Form 1099-Nec

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.

Learn more about 1099-NEC State Filing Requirements.

Ready to file Form 1099-NEC? Create a Free Account Now with TaxBandits and E-file your Form 1099-NEC in just a few minutes with the IRS, and the State agencies.

3. When is Form 1099-NEC due for 2022?

Form 1099-NEC must be filed with the IRS by January 31st every year. The payers are also responsible for furnishing a copy of Form 1099-NEC to their recipients by the actual due date (i.e January 31st) to make sure that the recipient copy deadline is also met on-time.

Learn more about Form 1099-NEC deadline in detail.

Create a Free Account Today and E-file your 1099-NEC Form.

4. Form 1099-NEC Copies

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.

Copy C

Copy for payers to maintain in the business records.

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Worried about handling different copies of Form 1099-NEC?

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5. How to file Form 1099-NEC Electronically?

File your Form 1099-NEC electronically with the IRS, and the required state using 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 your Form 1099-NEC electronically 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.

Ready to file Form 1099-NEC?

Create a Free Account Now with TaxBandits and E-file 1099 in just a few minutes. Get real time updates about your filing status.