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Line by Line IRS Form 1099 NEC Instructions for 2023

Updated on July 17, 2024 - 10:30 AM
Stephanie Glanville, TaxBandits
Stephanie

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 are required to file form 1099-NEC to the IRS and distribute the recipient copies before the deadline. This article covers the Form 1099-NEC instructions.


1. What is Form 1099 NEC?

Form 1099-NEC is an IRS form used by businesses 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.

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 2023 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

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

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.

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

    Box 1 of 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.

    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

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    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

    Box 2 of 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

    Form 1099 nec Box 3 - Reserved for Future Use

    The IRS has left the Box 3 for future use.

  • Box 4 - Federal Income Tax Withheld

    Form 1099 nec 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.

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    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 online reporting using Form W-9.

    Boxes 5 to 7

    Form 1099 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.

    TaxBandits for Every Business

    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 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).

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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.

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Worried about handling different copies of Form 1099-NEC?

Switch to TaxBandits Today and file your 1099-NEC in few simple steps with the IRS, State, and you can have TaxBandits to send your recipient copies via postal mail and online access. Create a Free Account Now


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.

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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.

Stephanie

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.

TaxBandits for Every Business